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  3. task 21 baseline assessment gaap 211 match the principle in...

Question: task 21 baseline assessment gaap 211 match the principle in...

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TASK 2.1 Baseline assessment: GAAP 2.1.1 Match the Principle in the first column with the description in the second column. Principle 1. Business entity AInformation that is important to the reader of the financial statements must be 2. Historical cost B In making adjustments in the books, accountants must regard events of a finan- 3. Matching 4. Prudence 5. Materiality Description 1 clearly shown as a separate item cial nature in a pessimistic light. Unless otherwise stated, the business is expected to continue for the foreseeable future C The financial affairs of the owners are kept separate from the financial affairs of the business E Expenses that are related to income earned must be recorded in the same finan- cial period 6. Going-concern F Unless otherwise stated, assets are recorded at their original cost price 2.1.2 Match the traditional principle in the first column with the example in the second column Principle Example The interest on loan for the last two months of the financial year has not yet been recorded. Rent for the first month of the next financial year was received in advance. Adjustments must be put through at the year-end in respect of interest and rent. Directors fees and Audit fees must be shown in ledger accounts of their own and must not be recorded as Salaries or Administration expenses. 1. Business entity A 2. Historical costB 3. Matching 4. Prudence 5. Materiality 6. Going-concernFThe c Land and buildings were bought for R2m but the municipality has valued them at D If all the stock has to be sold today the company will receive only R100 000. The Ea distribution to shareholders, and not in the Income Statement as an expense R4m. They must be shown in the financial statements as R2m The original cost of the trading stock is R200 000 but it can be sold for a lot more directors decide to value the stock at R200 000 in the Balance Sheet Dividends paid to shareholders must be reflected in the Appropriation account as The directors have inspected the collections from debtors and have decided to ease the
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