By Recognizing the Economic Effects of Inflation on the Accounting

question 76

Multiple Choice

By recognizing the economic effects of inflation on the accounting financial statements, which accounting assumption is ignored?

• A)Economic entity assumption
• B)Going concern assumption
• C)Stable dollar assumption
• D)Fiscal period assumption

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Definitions:

Fixed Costs

Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance.

Margin Of Safety

The difference between actual or expected sales and the break-even point, indicating the level of risk in failing to cover fixed costs.

Breakeven

The point at which total costs and total revenue are equal, resulting in no net loss or gain.

Sales

The exchange of a commodity or service for money; the action of selling something.