Which of the Following Is an Assumption Made in the Preparation

question 49

Multiple Choice

Which of the following is an assumption made in the preparation of the financial statements?

• A) Financial statements are prepared for a specific entity that is distinct from the entity's owners.
• B) The current market value is assumed to be less relevant than the original cost paid.
• C) The preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time.
• D) Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit.

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Definitions:

Prices

The amount of money expected, required, or given in payment for goods or services.

Budget Line

An illustrated chart detailing every possible pair of two items that could be acquired given a certain financial limit at fixed prices.

Price of A

Represents the amount of money required to purchase a specific item or service A.