Matching
Presented below are the basic assumptions and principles underlying financial statements.
Identify the basic assumption or principle that is described below.
Premises:
The economic life of a business can be divided into artificial time periods.
The business will continue in operation long enough to carry out its existing objectives.
Assets should be recorded at their cost.
Economic events can be identified with a particular unit of accountability.
Circumstances and events that make a difference to financial statement users should be disclosed.
Only transaction data that can be expressed in terms of money should be included in the accounting records.
Responses:
Historical cost principle
Economic entity assumption
Full disclosure principle
Going concern assumption
Monetary unit assumption
Periodicity assumption
Correct Answer:
Premises:
Responses:
The economic life of a business can be divided into artificial time periods.
The business will continue in operation long enough to carry out its existing objectives.
Assets should be recorded at their cost.
Economic events can be identified with a particular unit of accountability.
Circumstances and events that make a difference to financial statement users should be disclosed.
Only transaction data that can be expressed in terms of money should be included in the accounting records.
Premises:
The economic life of a business can be divided into artificial time periods.
The business will continue in operation long enough to carry out its existing objectives.
Assets should be recorded at their cost.
Economic events can be identified with a particular unit of accountability.
Circumstances and events that make a difference to financial statement users should be disclosed.
Only transaction data that can be expressed in terms of money should be included in the accounting records.
Responses:
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