Complete the following worksheet:
If a firm believes that some of its debtors may 'default', it should act on this by making sure that all possible losses are recorded in the books. This is an example of the _____ concept.
Prudence
The fact that a business is separate and distinguishable from its owner is best exemplified by the _____ concept.
Business Entity
Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the _____ concept.
Dual Aspect
The _____ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
Consistency
A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the _____.
Prudence
If a firm receives an order for goods, it would not be included in the sales figure owing to the _____.
Revenue Realisation
The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of _____ concept.
Money Measurement
Explanation
This worksheet tests the basic accounting concepts from NCERT Class 11 Accountancy. (i) Prudence/Conservatism requires anticipating all possible losses but not gains - hence recording potential defaults. (ii) Business Entity concept treats the business as separate from its owner. (iii) Dual Aspect concept explains that Assets = Liabilities + Capital (everything owned equals what is owed). (iv) Consistency requires following the same accounting method year after year. (v) Prudence again applies here - not recognizing unrealized gains from increased market value. (vi) Revenue Realisation concept states that revenue is recognized only when goods are invoiced/delivered, not when ordered. (vii) Money Measurement concept - only items that can be expressed in monetary terms are recorded; incompetence cannot be quantified.