Chapter 7 Notes monetary unit assumption states that only transaction data that can be expressed in terms of money be included in the accounting records economic entity assumption states that the activities of the entity be kept separate and distinct from the activities of the owner and of all other economic entities. time period assumption states that the economic life of a business can be divided into artificial time periods going concern assumption assumes that the company will continue in operation long enough to carry out its existing objectives. Despite numerous business failures, companies have a fairly high continuance rate. It has proved useful to adopt a going-concern assumption for accounting purposes. This assumption has significant implications. If a going concern assumption is not used, then plant assets should be stated at their liquidation value (selling price less cost of disposal)—not at their cost. In that case, depreciation of these assets is matching principle . It dictates that companies match expenses with revenues in the
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Generally Accepted Accounting Principles, Monetary unit assumption, assumption states