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Identify the Descriptions Below to the Basic Assumption or Principle

Question 306

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Identify the descriptions below to the basic assumption or principle underlying financial statements.

Premises:

Responses:

The economic life of a business can be divided into artificial time periods.

Historical cost principle

The business will continue in operation long enough to carry out its existing objectives.

Economic entity assumption

Assets should be recorded at their cost.

Full disclosure principle

Economic events can be identified with a particular unit of accountability.

Going concern assumption

Circumstances and events that make a difference to financial statement users should be disclosed.

Monetary unit assumption

Only transaction data that can be expressed in terms of money should be included in the accounting records.

Periodicity assumption

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.

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