Fundamental Accounting Assumptions

Fundamental accounting assumptions are basic points which are accepted all the accountants which are necessary for making financial statements. Some knows these points as accounting concepts. Whatever you know it but it is useful for explaining the language of accounting to all the people who are interested in accounting information.

1. Going Concern Assumption

As per this assumption, business will continuing doing work for long period. This assumption is very helpful to all interested parties. Business takes and gives loan because they have trust in this assumption. When creditor fears, business will stop within two days, he will never give his goods on credit but thanks to this assumption, creditor thinks that business's life is long than the life of businessman. He becomes fearless and give goods without any tension.

2. Consistency Assumption

As per this assumption, accounting information is collected from constant resources. It means, accountant will not change any method of recording transactions. If there will any change, its notice will given before changes. Consistency assumption is helpful to compare two or more years' financial statements. If there is any change without notice, accountant must show the footnote below the financial statement. Other interested parties can change the figure before comparing through getting knowledge from this footnote.

3. Accrual Assumption 

As per this assumption, business's financial performance is measured on basis of both cash and non-cash revenues and expenditures. Both outside expenses and incomes are added in regular cash incomes and expenses when we make income statement. It will help to get true net profit or net loss. 


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Accounting Education: Fundamental Accounting Assumptions
Fundamental Accounting Assumptions
Accounting Education
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