Question

Exercise 1-7 Identifying accounting principles and assumptions LO C4 Match each of the numbered descriptions with the principle or assumption it best reflects Description Principle/Assumption 1-A company reports details behind financial statements that would impact users' decisions. 2. Financial statements reflect the assumption that the business continues operating 3. A company records the expenses incurred to generate the revenues reported. Derived from long-used and generally accepted accounting practices such as the 4. concepts, assumptions, and guidelines for preparing the financial statements 5. Each business is accounted for separately from its owner or owners 6. Revenue is recorded when products and services are delivered. s 7. Usualy created by a pronouncement from an authoritative body 8.Information is based on actual costs incurred in transactions.

Answer 1

	Description	Principle/ Assumptions
1.	A company reports details behind financial statements that would impact users' decisions	Full Disclosure Principle
2.	Financial statements reflect the assumption that the business continues operating	Going Concern Assumption
3.	A company records the expenses incurred to generate the revenue reported	Matching Principle
4.	Derived from long used and generally accepted accounting principles	General Accounting Principle
5.	Each business is accounted for separately from the owners or partners	Business Entity Assumption
6.	Revenue is recorded when products and services are delivered	Revenue Recognition Principle
7.	Usually created by a pronouncement from an authoritative body	Specific Accounting Principle
8.	Information is based on actual costs incurred in transactions	Cost Principle

Ernst Consulting

Income Statement

For the period ended October 31

	$	$
Consulting Revenue		14,000
Less: Operating Expenses
Rent Expense	3,550
Salaries Expense	7,000
Telephone Expense	760
Miscellaneous Expense	580
Total Operating Expenses		11,890
Net Operating Income		2,110