Please answer the following questions briefly, point form answers are acceptable:
Please explain:
1. The COST Principle:
2. The Concept of RELEVANCE:
3. The REPORTING ENTITY CONCEPT:
4. What is the main objective of Financial Reporting?
5. Why are ADJUSTING ENTRIES necessary? What is the ACCOUNTING PRINCIPLE that requires adjusting entries?
6. What is meant by the term “ACCRUAL BASIS ACCOUNTING”?
7. Explain the term: CLOSING THE BOOKS
8. Explain the difference between PERMANENT and TEMPORARY ACCOUNTS
9. Please explain how a business entity can report a profit while showing a negative balance, a liability, in its bank account.
10. Please explain why a Prepaid Expense is an asset, and Unearned Revenue is a liability.
[ You may pay attention to the effect each of the above items on the cash account]
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