Generally Accepted Accounting Principles Chapter 1

Chapter 1 E1-4 1. The accounting method used is Incorrect. Because the cost principle requires that assets (such as buildings) be recorded and reported at their cost. 2.The accounting method used is Correct. Because according to the monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money be included in the accounting records. This assumption enables accounting to quantify (measure) economic events. The monetary unit assumption is vital to applying the cost principle 3.The accounting method used is Incorrect. Because according to The Economic Entity Assumption says that the activities of the entity are to be kept separate from the activities of its owner and all other economic entities. The business is accounted for separately from other business entities, including its owner. The reason for this is that separate information about each business is necessary for good decisions. Economic entity can be any organization or unit in society. E1-7 1.2.3.4.5.6.7.8.C D A B D B E F