A.

(4 marks)

Which accounting assumption is violated in each casE?

(The accountant recorded income for the year ended 3

0 June 2019 of $1000 for a contract with a

customer for services delivered during the months o

f May to August 2019.

The board of directors resolved to wind up the comp

any due to declining sales and falling profitabilit

y.

The balance sheet has all assets recorded at histor

ic cost.

The owner of the business took one of the cars used

by the sales team home and gave it to his 18-

year-old son to use while he was away at university

. The car is listed as a business asset on the

balance sheet.

The owners of a multi-story office block recognise

rent revenue when tenants pay their rent.

B. Ruby Jewellers Pty Ltd had a number of major bus

iness transactions and events during the

year ended 30 June 2020. Ignore GST.

An extract is given below:

Transaction 1: The owner of Ruby Jewellers Pty Ltd

Kathy Walworth used company funds to

purchase a computer for her sons university work f

or $3,000. Kathy recorded it as a decrease in cash

and an increase in Office computer.

Transaction 2: Kathy Walworth, the owner of Ruby Je

wellers Pty Ltd, wanted to make Ruby Jewellers

Pty Ltds 2020 profit looks even better. She did no

t record an interest payment of $5,000 incurred but

not due to be paid until August 2019.