Everything a firm owns, it also owes out to somebody. This co-incidenceis explained by the . . . . . . . . concept.

dual aspect
prudence
money measurement
revenue recognition

The correct answer is: A. dual aspect.

The dual aspect concept is the idea that every economic event has two aspects: a financial effect on one side of the balance sheet and a corresponding financial effect on the other side. For example, when a company buys inventory, it increases its assets (inventory) and increases its liabilities (accounts payable).

The other options are incorrect because:

  • Prudence is the concept that accountants should be conservative in their estimates and avoid overstating assets or income.
  • Money measurement is the concept that only economic events that can be measured in monetary terms should be recorded in the financial statements.
  • Revenue recognition is the concept that revenue should be recognized when it is earned, not when it is received.
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