Identify the Accounting Assumption That Has Been Violated for Each

question 41

Essay

Identify the accounting assumption that has been violated for each of the following situations.
a. Jeremy is preparing the financial statements for the High Tech Cleaning Company for 2013. The owners have decided to retire and close the business in early 2014. The financial statements have been prepared using historical costs.
b. Mikhail has a small tattoo business. All his cash receipts are deposited into his personal bank account. He pays his bills from either his business bank account or his personal depending on which bank account has more money.
c. Fred's Forestry business sells fir trees in both Canada and the United States. Depending on the transaction, Fred will record some transactions as Canadian and others as U.S. His financial statements have a mixture of Canadian and U.S. dollars.

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Definitions:

Mental Health

The state of someone’s psychological and emotional well-being, affecting how they think, feel, and behave.

Sociogram

A visual representation or map of the social relationships within a group, often used in social psychology to analyze interpersonal dynamics.

Reliability

The consistency and dependability of a measure or system in producing the same results under the same conditions.

Validity

The extent to which a concept, conclusion, or measurement is well-founded and likely corresponds accurately to the real world.