Presented below are the assumptions and principles discussed in this chapter. 1.

Question

Presented below are the assumptions and principles discussed in this chapter.

1.Full disclosure principle

2.Going concern assumption

3.Monetary unit assumption

4.Periodicity assumption

5.Historical cost principle

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)  

Is the rationale for why plant assets are not reported at liquidation value. (Note: Do not use the historical cost principle.)

________(b)  

Indicates that personal and business recordkeeping 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)  

Measurement basis used when a reliable estimate of fair value is not available.

________(f)  

Dictates that companies should disclose all circumstances and events that make a difference to financial statement users.

Explanation / Answer

Identify by number the accounting assumption or principle that is described below. Do not use a number more than once.

a) Is the rationale for why plant assets are not reported at liquidation value. (Note: Do not use the historical cost principle. - Going concern principle

b) Indicates that personal and business recordkeeping should be separately maintained- Economic entity assumption

c) Assumes that the dollar is the “measuring stick” used to report on financial performance - Monetory unit assumptions

d) Separates financial information into time periods for reporting purposes- Periodicity assumption

e) Measurement basis used when a reliable estimate of fair value is not available- Historical cost principle

f) Dictates that companies should disclose all circumstances and events that make a difference to financial statement users- Full disclosure principle

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