Accounting Assumptions

Question 1

Accounting Entity Assumption

Answer 1

The assumption that the records of assets, liabilities and business activities of the entity are kept completely seperate from those of the owner of the entity as well as those from other entities.

Question 2

Period Assumption

Answer 2

Assumption that reports are prepared for a particular period of time, such as a month or year in order to obtain comparability of results.

Significant in distinguishing between assets and expenses.

Question 3

Going Concern Assumption

Answer 3

Assumption that the business will continue operation into the future and its records are kept on that basis.

Question 4

Accrual Basis Assumption

Answer 4

Assumption that revenues are recognised when they’re earned, and expenses are recognised when incurred.