ACC 331 Study Guide - Midterm Guide: Financial Statement, Historical Cost, Accounting
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6 Sep 2018
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The four basic assumptions underlying gaap are: the economic entity assumption, the going concern assumption, the periodicity assumption, and the monetary unit assumption. The economic entity assumption states that all economic events can be identified with a particular economic entity. This means that any event that directly impacts the financial standing of a company can be traced to a particular economic entity. This assumption means that all financial information of a company is combined as one entity in accounting measures. The going concern assumption relates to the lifespan of a company. It states that in absence to the contrary, it will be assumed that a company will continue to operate indefinitely. The going concern assumption is important when measuring the depreciation of assets and for measuring the value of assets and liabilities if a company were to cease operations. The periodicity assumption divides the life of a company into artificial time periods.
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Related Questions
Listed below are several information, characteristics, andaccounting principles and assumptions. Match the term with theappropriate phrase that states its application.
(Points : 30)
Potential Matches: |
1 : Application of the same accounting principles as in thepreceding year |
2 : Earning process completed and realized or realizable |
3 : Notes as part of necessary information to a fairpresentation |
4 : Valuing assets at amounts originally paid for them |
5 : Yearly financial reports |
6 : Stable dollar assumption |
7 : Affairs of the business distinguished from those of itsowners |
8 : Presentation of error-free information withrepresentational faithfulness |
9 : Business enterprise assumed to have a long life |
10 : Accruals and deferrals in adjusting and closingprocess |
Answer |
: Monetary unit assumption |
: Revenue recognition principle |
: Reliability characteristic |
: Periodicity assumption |
: Matching principle |
: Full disclosure principle |
: Economic entity assumption |
: Going concern assumption |
: Historical cost principle |
: Consistency characteristic |