lem 3 Presented below are the basic assumptions and principles underlying financ

Question

lem 3 Presented below are the basic assumptions and principles underlying financial statements a. Historical cost principle b. Economic entity C. d. Going concern assumption e. Monetary unit assumption principle Identify the basic assumption or principle that is described below 1. The economic life of a business can be divided into artificial time periods 2. The business will continue in operation long enough to carry out its existing Assets should be recorded at their cost. 4 Economic events can be identified with a particular unit of accountability 5. Circumstances and events that make a difference to financial statement users should -3 be disclosed 6 Only transaction data that can be expressed in terms of money should be included in the acounting records

Explanation / Answer

1. The economic life of a business can be divided into artificial time periods.

f. Periodicity assumption

2. The Business will continue in operation long enough to carry out its existing objectives.

d. Going Concern Assumption

3. Asset should be recorded at their cost.

a.Historical cost principle

4. Economic events can be identified with a particular unit of accountability.

b.Economic entity assumption

5. Circumstances and events that make a difference to financial statement users should be disclosed.

c.Full Disclosure principle

6. Only Transaction data that can be expressed in terms of money should be included in the accounting records

e. Monetary Unit assumption

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