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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Identify the four assumptions that underlie accounting.

To determine

Assumptions in Accounting

The assumptions taken in accounting are Economic Entity assumption, going concern, Monetary unit and Time period assumptions while preparing the financial statements.

The assumptions taken while preparing financial statement.

Explanation

TheAssumptions taken while preparing financial statement is as under:

  1. Economic Entity Assumption: The Economic entity assumption states that the accounting records are prepared based on the fact that the owner and business is considered as separate people. Based on such assumption, the investment made by the owner is considered as liability of the business and drawings made by the owner shall be considered as repayment of such liability and is reduced from the capital.
  2. Going Concern assumption: The Going concern assumption states that the accounting records are prepared on the assumption that the business will continue to operate in the future for the longer period. Based on such assumption, the liabilities are recorded in the financial statements which is assumed to be paid in future...

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