Michael's business is his band - Inside Out - which provides music for functions. In each...

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Michael's business is his band - Inside Out - which provides music for functions. In each of the following situations, identify and explain which Accounting assumption has been breached. a Michael bought his mum a new computer for her home using cash from the business cheque account. b Michael thinks that the band (the business) might disband in a year or so and therefore has decided to list all their assets as current and any further asset purchases as expenses. c The band has just completed a three year tour and will now prepare financial reports to determine the success of the tour. d Michael has decided to list all the liabilities of the firm as current, despite a loan that is due in three years. e Michael received a cash payment for a function his band will play at in the next financial year. He decides to report it as revenue in this financial year. f Michael's business produced an Income Statement for the year that only reported the last six months revenue but a year's worth of expenditure. Michael's business is his band - Inside Out - which provides music for functions. In each of the following situations, identify and explain which Accounting assumption has been breached. a Michael bought his mum a new computer for her home using cash from the business cheque account. b Michael thinks that the band (the business) might disband in a year or so and therefore has decided to list all their assets as current and any further asset purchases as expenses. c The band has just completed a three year tour and will now prepare financial reports to determine the success of the tour. d Michael has decided to list all the liabilities of the firm as current, despite a loan that is due in three years. e Michael received a cash payment for a function his band will play at in the next financial year. He decides to report it as revenue in this financial year. f Michael's business produced an Income Statement for the year that only reported the last six months revenue but a year's worth of expenditure.

Answer rating: 100% (QA)

a The accounting assumption that has been breached is the Business Entity Assumption This assumption states that a business is considered a separate e... View the full answer