RSM219H1 Chapter 2: chapter 2

• School: UTSG
• Department: Rotman Commerce
• Course: RSM219H1
• Professor: Ralph Tassone

Document Summary

Four assumptions guide when to recognize (include) and how to measure economic events: the monetary unit, economic entity, time period, and going concern assumptions. The monetary unit assumption requires that only those things that can be expressed in money be included in the accounting records. The exchange of money is fundamental to business transactions; it makes sense that we measure a business in terms of money. The economic entity assumption states that economic activity can be identified with a particular accounting unit which is separate and distinct from the activities of the shareholders and of all other economic entities. Suppose you are one of shoppers drug mart"s shareholders. The amount of cash that you have in your personal bank account and the balance you owe on your personal car loan are reported in shoppers drug mart"s balance sheet. This is because, for accounting purposes, you and shoppers" are separate accounting entities.