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Briefly explain the "accrual basis assumption" and why financial statements are prepared under this basis.

Briefly explain the "accrual basis assumption" and why financial statements are prepared under this basis.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Short answer: Define a 'responsibility' in accordance with the Conceptual Framework's explanation, using examples. Explain briefly the accounting term "reporting entity" in accordance with the Conceptual Framework for Financial Reporting. Regarding the recording and subsequent revaluation of inventory, please define "the lower of cost and net realizable value." Briefly explain the “accrual basis assumption" and why financial statements are prepared under this basis.
Transcribed Image Text:Short answer: Define a 'responsibility' in accordance with the Conceptual Framework's explanation, using examples. Explain briefly the accounting term "reporting entity" in accordance with the Conceptual Framework for Financial Reporting. Regarding the recording and subsequent revaluation of inventory, please define "the lower of cost and net realizable value." Briefly explain the “accrual basis assumption" and why financial statements are prepared under this basis.
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