unit 1 homework - 2-7 a Allocates expenses to revenues in the proper period 6 MATCHING PRINCIPLE b Indicates that market value changes subsequent to

unit 1 homework - 2-7 a Allocates expenses to revenues in...

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2-7 a) Allocates expenses to revenues in the proper period. 6. MATCHING PRINCIPLE b) Indicates that market value changes subsequent to purchase are not recorded in the accounts. (Do not use revenue recognition principle) 5. HISTORICAL COST PRINCIPLE c) Ensures that all relevant financial information is reported. 7. FULL DISCLOSURE PRINCIPLE d) Rationale why plant assets are not reported at liquidation value. (Do not use historical cost principle) 2. GOING CONCERN ASSUMPTION e) Anticipates all losses, but reports no gains. 11. CONSERVATION f) Indicates that personal and business record keeping should be separately maintained. 1. ECONOMIC ENTITY ASSUMPTION g) Separates financial information into time periods for reporting purposes. 4. PERIODICITY ASSUMPTION h) Permits the use of market value valuation in certain specific situations. 10. INDUSTRY PRACTICES i) Requires that information significant enough to affect the decision of reasonably informed users should be disclosed. (Do not use full disclosure principle.) 9. MATERIALITY j) Assumes that the dollar is the “measuring stick” used to report on financial performance. 3. MONETARY UNIT ASSUMPTION

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