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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Which of the following is not an assumption that underlies accounting?

  1. Historical cost
  2. Economic entity
  3. Time-period
  4. Going-concern

To determine

Introduction: The Financial Accounting Standards Board (FASB) has laid down certain characteristics, assumptions and principles commonly known as conceptual framework of financial reporting which forms the basis for Generally accepted Accounting Principles (GAAP). In this key accounting assumptions states how a business transaction can be recorded. There are four basic assumptions which includes economic entity assumption, time-period assumption, going concern assumption and monetary unit assumption.

To choose-An option which is not included in accounting assumptions.

Explanation

Explanation for correct answer- Historical cost is a principle under accounting structure which states that the resources reported in financial statements should be recorded at initial acquisition cost that is the exchange price at the time the resource is acquired. Thus, historical cost is not an assumption.

Explanation for incorrect answer Option B- This is an assumption where economic entity assumptionstates that each busi...

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