Assumptions Unit

Question 1

Which accounting assumption allows bookkeepers to break a company’s financial life into smaller chunks of time?

Answer 1

The Periodicity Assumption

Question 2

Caren Cosmos is the world’s most popular soft rock folk singer. She sold t-shirts online last year and made $7,000. The money from these sales went directly into her personal banking account which she used for her personal needs. Which key accounting assumption did Caren ignore?

Answer 2

Entity Assumption

Question 3

An accounting method in which revenues are reported when they are earned and expenses are reported when they are incurred is called:

Answer 3

Accrual Method of accounting