Question

Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices. (Do not use qualitative characteristics.)
a. Fair value changes are not recognized in the accounting records.
b. Accounts receivable are recorded for sales on account rather than waiting until cash is received.
c. Financial information is presented so that investors will not be misled.
d. Intangible assets are capitalized and amortized over periods benefited.
e. Brokerage companies use fair value for purposes of valuing financial securities.
f. Each enterprise is kept as a unit distinct from its owner or owners.
g. All significant post-statement of financial position events are reported.
h. Revenue is recorded at point of sale.
i. All important aspects of bond indentures are presented in financial statements.
j. Rationale for accrual accounting.
k. The use of consolidated statements is justified.

Answer 1

Answer:

Please refer below the assumption, principle, or constraint that most appropriately justifies these procedures and practices for each.

Explanation:

A Fair value changes are not recognized in the accounting records.

Measurement Principle (historical cost)

B Accounts receivable are recorded for sales on account rather than waiting until cash is received.

Accrual basis assumption

C Financial information is presented so that investors will not be misled

Materiality Full Disclosure Principle

D Intangible assets are capitalized and amortized over periods benefited

Measurement Principle (Historical Cost)

E Brokerage companies use fair value for purposes of valuing financial securities.

Measurement Principle (Fair value)

F Each enterprise is kept as a unit distinct from its owner or owners.

Economic Entity Assumption Periodicity Assumption

G All significant post-statement of financial position events are reported

Full Disclosure Principle

H Revenue is recorded at point of sale

Revenue Recognition Principle

I All important aspects of bond indentures are presented in financial statements

Materiality Full Disclosure Principle

J Rationale for accrual accounting

Revenue and Expense Recognition Principle

K The use of consolidated statements is justified

Economic Entity Assumption