Question

Yellow Pencil Company pays​ Helen, a staff​ accountant, a​ $10,000 a month salary. How should the salary be recognized as an​ expense?

A.

Matched with revenue earned by the Yellow Pencil Company

B.

Systematically allocated with the use of the pencil making machinery of the Yellow Pencil Company factory

C.

Recorded as a measure of the effort expended by the staff accountant in the periods in which she works

D.

Upon the sale of pencils and in proportion to those sales

2.

Preparation of consolidated financial statements when a

parentminus−subsidiary

relationship exists is an example of the​ ________.

A.

common sense assumption

B.

economic entity concept

C.

monetary unit assumption

D.

periodicity assumption

Answer 1

Ans: The correct option for the answer is option C i.e. Recorded as a measure of the effort expended by the staff accountant in the periods in which she works

Paying accountant a salary of $10,000 it will Recorded as a measure of the effort expended by the staff accountant in the periods in which she works as other options are not related and well inter related ; giving services to the company will acts as an expense for the company and salary will directly be treated as an expense

Ans: The correct option for the answer is option B i.e Economic entity concept

It states that in economic entity concept principle is an accounting principle that states that a business entity's finances should be keep separate from those of the owner, partners, shareholders