Underlying assumptions or concepts of accounting, Accounting Basics

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Q. Underlying assumptions or concepts of accounting?

The major underlying assumptions or concepts of accounting are (a) business entity (b) going concern (continuity) (c) money measurement (d) stable dollar and (e) periodicity. This segment discusses the effects of these assumptions on the accounting process.

Data collect in an accounting system must relate to a specific business unit or entity. The business entity concept assumes that every business has an existence separate from its employees, owners, creditors, interested parties, customers and other businesses. For every business such as a horse stable or a fitness centre the business not the business owner is the accounting entity. Consequently financial statements are identified as belonging to a particular business entity. The content of these financial statements reports merely on the resources, activities and obligations of that entity.


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