Fallon Osmond is chairperson of the board of Simple Treats, Inc. Suppose Osmond has just founded Simple Treats, and assume that she considers her home and other personal assets as part of Simple Treats. Answer these questions about the evaluation of Simple Treats, Inc.

1. Which accounting assumption governs this situation?

2. How can the proper application of this accounting assumption give Osmond and others a realistic view of Simple Treats, Inc.? Explain in detail.