In the blanks provided to the right below, select the letters of the underlying assumption, measurement method, qualitative criteria, or constraint most closely associated with the statements. Some letters may be used more than once and some may not be used at all.A. Separate-entity assumption G. MatchingB. Continuity assumption H. Historical costC. Relevance I. Unit-of-measure assumptionD. Time-period assumption J. Faithful representationE. Cost/benefit K. VerifiabilityF. Revenue recognition L. Full disclosure 1. Any accounting method is acceptable for small items that will not change users’ decisions. 2. Assumes that all financial statement elements can be meaningfully described in dollar terms. 3. Long-term assets that increase in value are not normally written up in the financial statements. 4. Assets and earnings should be neither understated nor overstated. 5. The estimated future cost of fulfilling warranties that may not arise until two years into the future are accrued in the period of the sale. 6. It is not necessary to use a complex accounting method for minor items that are highly unlikely to improve the decisions of financial statement users. 7. It must be possible to numerically confirm all amounts reported in the body of the financial statements. 8. The various costs associated with a revenue transaction may be deferred until the revenue is earned. 9. The personal transactions of owners should be kept separate from transactions of the business. 10. Significant recognized and many nonrecognized items should be fully described in the notes to the financial statements. 11. Enables historical cost, rather than liquidation values, to be used. 12. Enables measurement of the income and financial position of entities at regular intervals.
In the blanks provided to the right below, select the letters of the underlying assumption, measurement method, qualitative criteria, or constraint most closely associated with the statements. Some letters may be used more than once and some may not be used at all.
A. Separate-entity assumption G. Matching
B. Continuity assumption H. Historical cost
C. Relevance I. Unit-of-measure assumption
D. Time-period assumption J. Faithful representation
E. Cost/benefit K. Verifiability
F. Revenue recognition L. Full disclosure
1. Any accounting method is acceptable for small items that will not change users’ decisions.
2. Assumes that all financial statement elements can be meaningfully described in dollar terms.
3. Long-term assets that increase in value are not normally written up in the financial statements.
4. Assets and earnings should be neither understated nor overstated.
5. The estimated future cost of fulfilling warranties that may not arise until two years into the future are accrued in the period of the sale.
6. It is not necessary to use a complex accounting method for minor items that are highly unlikely to improve the decisions of financial statement users.
7. It must be possible to numerically confirm all amounts reported in the body of the financial statements.
8. The various costs associated with a revenue transaction may be deferred until the revenue is earned.
9. The personal transactions of owners should be kept separate from transactions of the business.
10. Significant recognized and many nonrecognized items should be fully described in the notes to the financial statements.
11. Enables historical cost, rather than liquidation values, to be used.
12. Enables measurement of the income and financial position of entities at regular intervals.
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