Complete the table with words from the text and related forms. Put a stress mark in front of the stressed syllable.
Concrete and abstract noun
Nouns for people and organizations
A. Read the text, ignoring the missing parts.
Accounting Assumptions and Principles
Accounting principles are built on a foundation of a number of basic concepts. One of them is known as the consistency principle. Companies can choose their accounting policies (1) . But in choosing accounting policies they have to be consistent which means using the same methods every year, unless there is a good reason to change a policy. The policies have to be disclosed to the shareholders in the Statement of Accounting Policies included in the Annual Report.
The historical cost principle states that companies (2) and not their (estimated) current selling price or replacement cost. The current price is not important if the business is a going concern a successful company that will continue to do business as its assets are not going to be sold, or (3) . Some countries with regular high inflation use replacement cost accounting,which values all assets at their current replacement cost the amount that would have to be paid to replace them now.
Other accounting principles are as follows. The full-disclosure principlestates that (4) . The principle of materialitysays that very small and unimportant amounts do not need to be shown. The principle of conservatism (prudence)is that (5) , you choose the one that is least likely to overstate or over-estimate assets or income. The objectivity principle says that accounts should be based on facts and not on personal opinions or feelings. The revenue recognitionprinciple is that revenue is recognized in the accounting period in which it is earned. This means the revenue is recorded (6) , not when they are paid for. The matching principle states that each cost or expense related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn.
B. Fit the missing parts A-H in the gaps. There is one extra.
compare profits with those of previous years
financial reporting must include all significant information
do not currently need to be replaced
where different accounting methods are possible
record the original purchase price of assets
when a service is provided or goods delivered
their way of doing their accounts
C. When writing accounts and financial statements, accountants have to follow a number of assumptions, principles and conventions. The following are the main assumptions used by accountants. Match them with their definitions.
Separate (business) entity
a business will continue into the future
all financial transactions are in a single monetary unit or currency.
Continuity or going concern
a business is an accounting unit separate from its owners, creditors, managers and their assets.
the economic life of the business can be divided into (artificial) time periods such as the financial year, or a quarter of it.