The foundational principles of accounting are as follows:
Recognition/ Derecognition
1. Economic entity
2. Control
3. Revenue recognition and realization
4. Matching
Measurement
5. Periodicity
6. Monetary unit
7. Going concern
8. Historical cost
9. Fair value
Presentation and Disclosure
10. Full disclosure
Instructions
For each situation that follows, identify by its number the foundational principle above that best describes it.
(a) Allocates expenses to revenues in the proper period.
(b) Indicates that market value changes after the purchase are not recorded in the accounts unless impairment exists.
(Do not use the revenue recognition principle.)
(c) Ensures that all relevant financial information is reported.
(d) Is why plant assets are not reported at their liquidation value. (Do not use the historical cost principle.)
(e) Related to the economic entity principle, defines the entities that should be consolidated in the financial statements.
(f) Indicates that personal and business record keeping should be separately maintained.
(g) Separates financial information into time periods for reporting purposes.
(h) Permits the use of market value valuation in certain specific situations.
(i) Requires passing of risks and rewards, measurability, and collectibility before recording the transaction.
(j) Assumes that the dollar is the measuring unit for reporting on financial performance.