For each of the following, indicate the accounting concept or constraint that has been violated, if any:
1) The company currently records its accounting transactions and prepares
its financial reports manually. The cost of using a new computerized
accounting system to do these tasks is estimated at $25,000.
Annual savings are expected to be $10,000.
2)Inventory is reported at cost when market value is higher.
3)Paper clips expense appears on the income statement, at $10.
4)Bad debt expense is recorded in the period when the account receivable is written off.
5)Small tools are recorded as long-lived assets and depreciated.
ANS:
1)Materiality constraint
2)cost benefit constraint
3)expense recognition criteria
4)matching principle
5)neutral
are these correct?