Question

Lawton Company records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent?
A) economic entity assumption
B) monetary unit assumption
C) going concern assumption
D) accounting period assumption

Answer 1

Answer: Monetary unit assumption

Explanation: The monetary unit of assumption states that every transaction of the business can be expresses in relation to monetary units and these units will be stable over time. The key point in this assumption is that it assumes monetary units to be stable and dependable.

In the given case, Lawton records transactions in dollars and disregards changes in value of dollars over time. Hence, we can conclude that Lawton is following monetary unit assumption.