Accounting Assumptions and Principles
Response to the following problem:
Certain accounting assumptions and principles have had an important impact on the development of generally accepted accounting principles. The following is a list of these assumptions and principles as well as a list of statements describing certain accounting practices.
A. Entity E. Monetary unit
B. Continuity F. Realization
C. Period of time G. Matching
D. Historical cost H. Conservatism
1. The business, rather than its owners, is the reporting unit.
2. Depreciation costs are expensed in the periods of use rather than at the time the asset is acquired.
3. Accounting measurements are reported in dollars.
4. The year is the normal reporting unit.
5. In the absence of evidence to the contrary, the business will operate long enough to carry out its existing commitments.
6. Revenue is usually recognized at the time of sale.
7. Exchange price is retained in the accounting records.
8. An accounting alternative is selected that is least likely to overstate assets and income.
Required
Select the accounting assumption or principle that justifies each accounting practice and place the appropriate letter on the line preceding the statement.