bookkeeping basics coursera week 4 answers

Key Assumptions Part 1 Practice Quiz

1. This type of assumption/principle requires a business to disclose all information about the business that is important for a lender or investor to know in financial statements or in the financial statement notes.

  • Economic Entity Assumption
  • Reliability Assumption
  • Conservatism Assumption
  • Full Disclosure Principle

2. The Economic Entity Assumption states:

  • Business and personal financial activities must be separate for business owners.
  • Companies can only record financial transactions that can be verified.
  • To be financially conservative when recording information that is unclear.

3. When the bookkeeper or accountant has a choice between two acceptable alternatives, they should choose the one that will report less profit, less asset amount, or a greater liability amount. This is based upon which assumption/principle?

  • Vital Asset Assumption
  • Conservatism Assumption
  • Full Disclosure Assumption

4. Your client Rosie Fern wants to add the cost of the trellises she built for her herbal gardening business but can’t find a receipt or proof that she paid.

Which assumption/principle restricts you from recording this information in financial activities?

  • The Reliability Assumption 
  • Economic Entity
  • Conservatism Assumption

Key Assumptions Part 2 Practice Quiz

5. When a bookkeeper is using the US dollar as currency in accounting and is not considering changes in the value of that currency she is employing the:

  • Collaboration Assumption
  • Going Concern Assumption
  • Monetary Unit Assumption

6. This assumption / principle is very subjective and should be used with caution outside of rounding to the nearest dollar when entering financial information.

  • Monetary Unit Assumption
  • Materiality Principle
  • Conservatism Assumption

7. A company is considered a Going Concern when it:

  • Is providing proof of expenditures for financial statements.
  • Is losing money and access to credit.
  • Is stable, able to operate and able to meet its financial obligations.

8. Cecilia Tubular sells 1980s themed enamel pins. She has a huge inventory she purchased in 1984 at $0.10 each. They are now worth $1 each. According to the Monetary Unit Assumption, you:

  • Keep the value of the pins at $0.10 each.
  • Split the difference and record the value at $0.45 each 
  • Update her financials to show the increased value of the pins to $1 each

Shuffle Q/A 1

9. If a business is using the Consistency Principle they will:

  • Treat the business as a separate entity, so the activities of a business must be kept separate from any other financial activities of its business
  • Ignore an accounting standard if the impact has such a small effect on financial statements that it would not be misleading. 
  • Adopt a specific accounting method and will enter all similar items in the exact same way in the future.

Periodicity Assumption Practice Quiz

10. True or False: According to the Periodicity Assumption, companies can only review their financial health at the end of their fiscal year?

  • True
  • False

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