Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy?
A) Monetary unit assumption.
B) Periodicity assumption.
C) Going-concern assumption.
D) Economic entity assumption.

Question

Quizplus · Accepted Answer

Severe inflation can threaten the validity of the monetary unit assumption, which assumes that financial transactions are recorded in a stable currency with a constant purchasing power. In an inflationary environment, money loses its value over time, which can distort the true financial picture of a company.

Which of the Following Basic Accounting Assumptions Is Threatened by the Existence