u04a1 Artina McRae.docx

u04a1 Artina McRae.docx - U04a1 Artina McRae 1 1 Question 1...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
U04a1 Artina McRae 1 1. Question 1: Discuss the effects of the five major accounting assumptions on the accounting process . 1. Business entity - is the assumption that a business is a separate entity from that of its owner and therefore all activity of the company is recorded in accounts of the business entity only. 2. Going concern ( continuity )- is the assumption that an organization will continue operating for the foreseeable future unless liquidation is imminent. Accountants use the continuity concept to determine whether they should use previously used cost values. 3. Money measurement - is the use of a single monetary unit in creating financial statements and dealing with accounts. U.S. accountants use the U.S. Dollar as a unit of measure without which much of the accounting process would be impossible. 4. Stable dollar - is the assumption that the unit of measurement of choice is relatively stable and thus accountants do not adjust for a change in value which poses an issue when recording depreciation. 5. Periodicity - is the rule by which accountants divide an entity's life into time periods to document its actions. ( Edwards, Hermanson, and Maher, 2011.) 2. Question 2: List and describe all five concepts' impact on the accounting process. 1. General-purpose financial statements - these are financial statements that accountants prepare every so often as asked by upper management or potential investors. 2. Substance over form - is the concept that accountants document a transaction based on an item’s substance rather than its legal form. 3. Consistency - is the notion that accountants or company’s use the same principles of accounting and if they change them, they must explain in detail the reasons, causes, and effects.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern