chapter 7 E7-3 - E7-3 Presented below are the assumptions principles and constraints discussed in this chapter 1 Economic entity assumption 2 Going

chapter 7 E7-3 - E7-3 Presented below are the assumptions...

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E7-3 Presented below are the assumptions, principles, and constraints discussed in this chapter. 1. Economic entity assumption 2. Going concern assumption 3. Monetary unit assumption 4. Time period assumption 5. Cost principle 6. Matching principle 7. Full disclosure principle 8. Revenue recognition principle 9. Materiality 10. Conservatism Instructions Identify by number the accounting assumption, principle, or constraint on page 323 that describes each situation below. Do not use a number more than once. (a) Is the rationale for why plant assets are not reported at liquidation value. (Do not use historical cost principle.) (b) Indicates that personal and business record-keeping should be separately maintained. (c) Ensures that all relevant financial information is reported. (d) Assumes that the dollar is the “measuring stick” used to report on financial performance. (e) Requires that the operational guidelines be followed for all significant items. (f ) Separates financial information into time periods for reporting purpose. (g) Requires recognition of expenses in the same period as related revenues. (h) Indicates that market value changes subsequent to purchase are not recorded in the accounts Answer: - (a) 6. Matching principle. (b) 5. Historical cost principle. (c) 7. Full disclosure principle. (d) 2. Going concern assumption. (e) 11. Conservatism. (f) 1. Economic entity assumption. (g) 4. Periodicity assumption. (h) 10. Industry practices. (i) 9. Materiality. (j) 3. Monetary unit assumption.

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