Question

1. The following are accounting procedures and practices used by several companies. A. As soon as it purchases inventory, Slotkin Company records the purchase price as cost of goods sold to simplify its accounting procedures. B. At the end of each year, Sly Company records and reports its economic resources based on appraisal values. C.Egan Company prepares financial statements only every two years to reduce its costs of preparing the statements. D. Grant Company sells on credit and records revenue at that time, even though it knows that collection is highly uncertain, and very significant efforts have to be made to collect the accounts. E. Because of inflation, Count Company adjusts its financial statements each year to show the current purchasing power for all items. F. Dustin Troy combines his personal transactions and business transactions when he prepares his company's financial statements, so that he can tell how well he is doing on an "overall" basis G. At the end of each year, Vix Company reports its economic resources on a liquidation basis even though it is likely to operate in the future. Required: Identity what accounting assumption or principle each procedure or practice violates, and indicate what should be done to rectify the violation I

Answer 1

As per policy, only one question or its first four parts are allowed to answer at a time, so answering Q1 here :

Serial	Avoided Principles / Assumptions/ Concepts:	Principles / Assumptions says:	Rectification of error:
A	Expense recognition principle and Matching principle	Expenses must match with the revenues	Purchases should be recorded in Inventory account and recorded under COGS alongwith the related Sales.
B	Historical cost concept	Financial statements should be presented on historical cost only.	Report each and every resources and Financial Statements at the historical cost.
C	Time period assumption	Every concern has to follow a yearly preparation of financial statements.	Should prepare the financial statements every year.
D	Accrual principle and Revenue recognition concept	revenue should be booked as and when happen	Should record the revenues as and when occurs irrespective of cash receipt.
E	Historical cost concept	The entity is supposed to be exist for ever and its resources should be recorded at their historical cost.	Report each and every resources and Financial Statements at the historical cost.
F	Economic entity assumption/Separate entity concept	Entity's transactions should be recorded separate from its owner's personal transactions, it being separate entity from its owner.	Dustin should records the entity's transactions seperately from its personal one.
G	Historical cost concept	The entity is supposed to be exist for ever and its resources should be recorded at their historical cost.	Report each and every resources and Financial Statements at the historical cost.