Question

4. What accounting assumption, principle, or constraint would use in each of the situations below?

A. records expenses when incurred, rather than when cash is paid.
B. was involved in litigation over the last year. This litigation is disclosed in the financial statements.
C. allocates the cost of its depreciable assets over the life it expects to receive revenue from these assets.
D. records the purchase of a new Lenovo PC at its cash equivalent price.

Answer 1

A.) Revenue Recognition

B.) Full disclosure

C.) Expense Recognition

D.) Historical Cost

Step-by-step explanation:

Revenue Recognition principle maintains theta revenue is entered into the income statement onev it is earned or incurred without necessarily waiting till cash is paid.

Expense Recognition is usually related to when assets are being converted into expenses such that cost of asset is apportioned over the useful years of the asset.

Full Disclosure maintains the release or disclosure of information related ongoing business operations such as pending lawsuit during the disclosure of business financial statement.

Historical Cost: This involves value recorded on the balance sheet that portrays the original amount paid to acquire an asset at the time of purchase