The Rule That Requires Financial Statements to Reflect the Assumption

question 272

Multiple Choice

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:

• A) Objectivity principle.
• B) Monetary unit assumption.
• C) Business entity assumption.
• D) Going-concern assumption.
• E) Measurement (Cost) Principle.

---

Definitions:

Periodic Inventory System

A method of inventory valuation where updates to the inventory account occur at periodic intervals, rather than continuously.

Inventory

The goods and materials a business holds for the purpose of resale or production, reflected as an asset on the balance sheet.

Merchandise Purchased

Goods bought by a business for the purpose of resale, forming part of its inventory.

Cost Of Goods Available

The total cost of all merchandise or materials available for sale or use, including beginning inventory plus purchases.