Which of the following is an assumption made in the preparation of the financial statements?
A)Financial statements are prepared for a specific entity that is distinct from the entity's owners.
B)The current market value is assumed to be more relevant than the original cost paid.
C)The preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time.
D)Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit.

Question

Quizplus · Accepted Answer

The assumption that financial statements are prepared for a specific entity that is distinct from the entity's owners is a fundamental principle of accounting. This assumption ensures that the financial position, performance, and cash flows of the company are presented in a manner that is independent of the personal financial affairs of its owners. The other options are also important assumptions in accounting, but they are not as fundamental as the assumption of a separate legal entity.

Which of the Following Is an Assumption Made in the Preparation