Exercise 1-7 Identifying accounting principles and assumptions LO C4 .pdf

Exercise 1-7 Identifying accounting principles and assumptions LO C4 Match each of the
numbered descriptions with the principle or assumption it best reflects Description
Principle/Assumption 1-A company reports details behind financial statements that would impact
users\' decisions. 2. Financial statements reflect the assumption that the business continues
operating 3. A company records the expenses incurred to generate the revenues reported.
Derived from long-used and generally accepted accounting practices such as the 4. concepts,
assumptions, and guidelines for preparing the financial statements 5. Each business is accounted
for separately from its owner or owners 6. Revenue is recorded when products and services are
delivered. s 7. Usualy created by a pronouncement from an authoritative body 8.Information is
based on actual costs incurred in transactions.
Solution
Ernst Consulting
Income Statement
For the period ended October 31DescriptionPrinciple/ Assumptions1.A company reports details
behind financial statements that would impact users\' decisionsFull Disclosure
Principle2.Financial statements reflect the assumption that the business continues
operatingGoing Concern Assumption3.A company records the expenses incurred to generate the
revenue reportedMatching Principle4.Derived from long used and generally accepted
accounting principlesGeneral Accounting Principle5.Each business is accounted for separately
from the owners or partnersBusiness Entity Assumption6.Revenue is recorded when products
and services are deliveredRevenue Recognition Principle7.Usually created by a pronouncement
from an authoritative bodySpecific Accounting Principle8.Information is based on actual costs
incurred in transactionsCost Principle.

1. Exercise 1-7 Identifying accounting principles and assumptions LO C4 Match each of the
numbered descriptions with the principle or assumption it best reflects Description
Principle/Assumption 1-A company reports details behind financial statements that would impact
users\' decisions. 2. Financial statements reflect the assumption that the business continues
operating 3. A company records the expenses incurred to generate the revenues reported.
Derived from long-used and generally accepted accounting practices such as the 4. concepts,
assumptions, and guidelines for preparing the financial statements 5. Each business is accounted
for separately from its owner or owners 6. Revenue is recorded when products and services are
delivered. s 7. Usualy created by a pronouncement from an authoritative body 8.Information is
based on actual costs incurred in transactions.

Solution

Ernst Consulting
Income Statement
For the period ended October 31DescriptionPrinciple/ Assumptions1.A company reports details
behind financial statements that would impact users\' decisionsFull Disclosure
Principle2.Financial statements reflect the assumption that the business continues
operatingGoing Concern Assumption3.A company records the expenses incurred to generate the
revenue reportedMatching Principle4.Derived from long used and generally accepted
accounting principlesGeneral Accounting Principle5.Each business is accounted for separately
from the owners or partnersBusiness Entity Assumption6.Revenue is recorded when products
and services are deliveredRevenue Recognition Principle7.Usually created by a pronouncement
from an authoritative bodySpecific Accounting Principle8.Information is based on actual costs
incurred in transactionsCost Principle