These are the assumptions, principles, and constraints discussed in this and previous chapters.
|
Economic entity assumption. |
6. Materiality constraint. |
|
Expense recognition principle. |
7. Full disclosure principle. |
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Monetary unit assumption. |
8. Going concern assumption. |
|
Periodicity assumption. |
9. Revenue recognition principle. |
|
Cost principle. |
10. Cost constraint. |
Instructions
Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a number more than once.
_____ (a) Is the rationale for why plant assets are not reported at liquidation value. (Do not use the cost principle.)
_____ (b) Indicates that personal and business record-keeping should be separately maintained.
_____ (c) Ensures that all relevant financial information is reported.
_____ (d) Assumes that the dollar is the “measuring stick” used to report on financial performance.
_____ (e) Requires that accounting standards be followed for all significant items.
_____ (f) Separates financial information into time periods for reporting purposes.
_____ (g) Requires recognition of expenses in the same period as related revenues.
_____ (h) Indicates that fair value changes subsequent to purchase are not recorded in the accounts.