Question

Which of the following lists describes the four basic principles of accounting.

a) Tracking accounts; monitoring cash flow; managing risk for profitability; developing a budget.
b) Financial management planning; annual budget planning; performance reporting; variance analysis.
c) Tracking volume-driven costs; monitoring accounts payable; reporting depreciation; monitoring cash flow.
d) Tracking accounts payable; tracking accounts receivable; monitoring funds; tracking cash flow.

Answer 1

The accurate representation of the four basic principles of accounting is not directly listed amongst the given choices. However, tracking accounts payable and receivable, alongside monitoring funds and cash flow, are daily applications of these principles within a financial context.

Step-by-step explanation:

The four basic principles of accounting are generally accepted to be: cost principle, revenue recognition principle, matching principle, and full disclosure principle. These principles help ensure that financial statements are consistent, reliable, and comparable. Among the options provided, none includes all these basic principles specifically. However, option (d) 'Tracking accounts payable; tracking accounts receivable; monitoring funds; tracking cash flow.' most closely relates to the daily applications of these principles, as it involves the concepts of keeping track of money owed by and to the company, monitoring the current funds, and managing cash flow, which is fundamental to the accounting cycle.

Financial institutions, as highlighted in Unit 5, offer a variety of accounts to support this, such as facilitating money management and investment growth. Balancing a checkbook and maintaining a budget are key for personal financial management, underscoring the importance of the principles of accounting in everyday financial activities.

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