Question

Presented below are the assumptions and principles discussed in this chapter. 1. Full disclosure principle. 4. Periodicity (time period) assumption. 2. Going concern assumption. 5. Historical Cost principle 3. Monetary unit assumption. 6. Economic entity assumption. Instructions: Identify by number the accounting assumption or principle that is described below. Do not use a number more than once. (a) ________ Belief that a company will continue to operate for the foreseeable future. (b) ________ Indicates that personal and business records should be separately maintained. (c) ________ Assumes that the dollar is the “measuring stick” used to report on financial performance. (d) ________ Separates financial information into time periods for reporting purposes. (e) ________ A belief that items should be reported on the balance sheet at the price that was paid to acquire them. (f) ________ Dictates that companies should disclose all circumstances and events that make a difference to financial statement users

Answer 1

(a) Going concern assumption belief that a company will continue to operate for the foreseeable future.
(b) Economic entity assumption indicates that personal and business records should be separately maintained.
(c) Monetary unit assumption assumes that the dollar is the “measuring stick” used to report on financial performance.
(d) Periodicity (time period) assumption separates financial information into time periods for reporting purposes.
(e) Historical cost principle a belief that items should be reported on the balance sheet at the price that was paid to acquire them.
(f) Full disclosure principle dictates that companies should disclose all circumstances and events that make a difference to financial statement users.