Question

Match the accounting terms with the corresponding definitions.

1. Specific identification
2. Materiality concept
3. Last-in, first-out (LIFO)
4. Conservatism
5. Consistency principle
6. Weighted-average
7. Disclosure principle
8. First-in, first-out (FIFO)

a. Treats the oldest inventory purchases as the first units sold.
b. Requires that a company report enough information for outsiders to make knowledgeable decisions.
c. Identifies exactly which inventory item was sold. Usually used for higher cost inventory.
d. Calculates a weighted-average cost based on the cost of goods available for sale and the number of units available.
e. Principle whose foundation is to exercise caution in reporting financial statement items.
f. Treats the most recent/newest purchases as the first units sold.
g. Businesses should use the same accounting methods from period to period.

Answer 1

Answer and Explanation:

The matching is as followS;

1. Option c as it shows the exact item to be sold and generally used for higher inventory

2. Option h. Here the significant or useful information should be reported

3. Option f, Here the recent purchased would be sold first

4. Option e. It exercised the caution for reporting the items of the financial statements

5. Option g. Here the same method to be followed every year like for straight line depreciation method

6. Option d. Here the weighted average cost would be depend upon the cost of goods available

7. Option b. Here the company should report the sufficient information in order to make the sound decisions

8. Option a. Here the old inventory sold first