Question 1: Competent: Discuss the effects of four of the five major accounting assumptions on the accounting process. The effects of the five main accounting assumptions that influence the accounting process are:1. Business entity: Business entity assumes that the data collected in an accounting system relates to a specific business. The concept of a business entity assumes that the existence of each business is separate from its owners, creditors, employees, stakeholders and other businesses. Under the business entity premise, the data collected is strictly about the business and not the owner. There are other forms of entities within corporations. For example, companies such as Toyota or Ford Motors may have several legal entities for reporting purposes, but the company may be treated as a single business entity because they have common ownership.2. The going concern assumption believes that a business will continue to operate unless concrete evidence suggests that the entity will go out of business. Termination of an entity occurs when a company creates business operations and sells its assets. The going concern assumption is no longer valid if a company appears destined to be liquidated. Accountants often cite this assumption to justify using actual cost rather than market cost to measure activities. Money measurement refers to the measurement of business economic activities in monetary terms such as dollars instead of using physical terms such as inches, grams, or feet. Using a common monetary unit allows accountants to report economic activities consistently. Without monetary units, it would be impossible to add things like buildings, equipment, and inventory to the balance sheet. Financial statement ratios in monetary units to enable users to make val...... middle of paper ...... be the number one seller and generate revenues in excess of $500 million. The company also has a patent lawsuit that it believes it will lose for $20 million. According to the principles of conservatism, the company is suggested to report the contingent liability in the footnotes of the company's financial statement. ReferencesAverkamp, ​​H. (2014, January 1). Accounting principles | Explanation | Accounting coach. AccountingCoach.com. Retrieved May 2, 2014, from http://www.accountingcoach.com/accounting-principles/explanationHermanson, R., Edwards, J., & Maher, M. (2010). Accounting principles: a business perspective. (Vol.2). Textbook Equity inc. DOI: www.textbookequity.com Ph.D. Siegel. CPA, Joel G.; PhD Shim, Jae K. (02-01-2010). Dictionary of Accounting Terms (Barron's Dictionary of Accounting Terms) (p. 129). Barron's Educational Series. Kindle edition.