The monetary assumption:
A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
B) Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.
C) Means that we can express transactions and events in monetary, or money, units.
D) Prescribes that a company record the expenses it incurred to generate the revenue reported.
E) Means that a business is accounted for separately from other business entities, including its owner.

Question

Quizplus · Accepted Answer

The monetary assumption presumes that transactions and events can be expressed in monetary, or money, units. This allows for the recording and reporting of financial information in a standardized form that can be easily understood by users of the information.

Option A is describing the going concern assumption, which presumes that the business will continue operating instead of being closed or sold.

Option B is describing the time period assumption, which presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.

Option D is describing the expense recognition principle, which prescribes that a company record the expenses it incurred to generate the revenue reported.

Option E is describing the entity assumption, which presumes that a business is accounted for separately from other business entities, including its owner.

The Monetary Assumption