Exercise A Match the items in Column A with the proper descriptions in Column B.

Column A Column B Going concern (continuity).

a. An assumption relied on in the preparation of the primary financial statements that would be unreasonable when the inflation rate is high.

Consistency.

b. Concerned with relative dollar amounts.

Disclosure.

c. The usual basis for the recording of assets.

Periodicity.

d. Required if the accounting treatment differs from that previously used for a particular item.

Conservatism.

e. An assumption that would be unreasonable to use in reporting on a firm that had become insolvent.

Stable dollar.

f. None of these.

Matching. g. Requires a company to use the same accounting procedures and practices through time.

Materiality. h. An assumption that the life of an entity can be subdivided into time periods for reporting purposes.

Exchange-price (cost). i. Discourages undue optimism in measuring and reporting net assets and net income.

Business entity. j. Requires separation of personal from business activities in the recording and reporting processes.