1. Economic entity assumption 6. Matching principle 2. Going concern assumption

Question

1. Economic entity assumption 6. Matching principle
2. Going concern assumption 7. Full disclosure principle
3. Monetary unit assumption 8. Revenue recognition principle
4. Time period assumption 9. Materiality
5. Cost principle 10. Conservatism

(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.

Explanation / Answer

(a) Is the rationale for why plant assets are not reported at liquidation value. (Do not use historical cost principle.) - 5. Cost principle (b) Indicates that personal and business record-keeping should be separately maintained. Economic entity assumption (c) Ensures that all relevant financial information is reported. Full disclosure principle (d) Assumes that the dollar is the “measuring stick” used to report on financial performance. Monetary unit assumption (e) Requires that the operational guidelines be followed for all significant items. Not a accounting assumption (f ) Separates financial information into time periods for reporting purpose. Time period assumption (g) Requires recognition of expenses in the same period as related revenues. Matching principle (h) Indicates that market value changes subsequent to purchase are not recorded in the accounts Conservatism

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