Question 7:


The accounting concept that directly defines the profit or loss statement is  

A. Consistency  

B. Matching  

C. Prudence  

D. Materiality  

E. Periodicity 


The correct answer is (B)


Past Question and Answer Review:

Concepts, principles, conventions, laws, rules  and regulations combined are known as    Generally Accepted Accounting  Principles  (GAAP).

The concepts and conventions as described above are discussed below: 

A. Consistency - The concept of consistency means that accounting methods once adopted must be applied consistently in future. 

B. Matching - the matching concepts instructs that an expense should be reported in the same period in which the corresponding revenue is earned

C. Prudence - Under the prudence concept, do not overestimate the amount of revenues recognized or underestimate the amount of expenses.

D. Materiality - The materiality principle states that an accounting standard can be ignored if the net impact of doing so has such a small impact on the financial statements that a reader of the financial statements would not be misled.

E. Periodicity - The periodicity concept also called the time interval concept, is a period during which business enterprises are required to prepare financial statement at specified intervals

The closest answer that directly defines the P/L statement is the Matching concepts

The correct answer is (B)

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