The following is a list of accounting assumptions that have had an important impact on the development of generally accepted accounting principles and statements describing certain accounting practices.
A. Reporting entity
B. Going concern
C. Period of time
D. Historical cost
E. Monetary unit
F. Recognition
G. Accrual accounting
H. Revenue recognition
I. Expense recognition
J. Conservatism
______ 1. To provide timely information, companies prepare and report financial statements at the end of each year.
______ 2. Appropriate recognition when a company consumes economic resources in conducting business operations.
______ 3. Accounting measurements for U.S. companies are reported in dollars.
______ 4. The financial statements represent the business, rather than its owners.
______ 5. In the absence of evidence to the contrary, the business can be reasonably expected to operate long enough to carry out its existing commitments.
______ 6. Appropriate recognition when a company creates economic benefits (inflows of assets or settlements of obligations) by providing goods or services to customers.
______ 7. Transactions and events are recognized initially at the exchange price to provide relevant and reliable information.
______ 8. An accounting alternative is selected that is least likely to overstate assets and income.
______ 9. The process of formally recording and reporting an item in the financial statements of a company.
______ 10. The process of measuring and reporting the economic effects of transactions, events, and circumstances in the appropriate period when those effects occur, even though the cash consequences may occur in a different period.
Required:
Select the accounting assumption that justifies each accounting practice and place the appropriate letter on the line preceding the statement.