Accounting Assumptions

Question 1

Accounting entity assumption

Answer 1

A business enterprise (entity) has an existence separate from the private financial affairs of its owner/s. The accounting records of the business are separate from the personal financial records of the owner.

Question 2

Monetary assumption

Answer 2

Only transactions that can be assigned a monetary value that is generally accepted as being accurate and objective, can be entered in accounting records.

Question 3

Historical cost assumption

Answer 3

An asset is recorded in an accounting system at its acquisition value (original purchase price) an this value is not changed as time passes

Question 4

Going concern assumption

Answer 4

Assuming that the business will continue to operate successfully for the foreseeable future

Question 5

Accounting period assumption

Answer 5

The life of an enterprise is divided into arbitrary time periods known as accounting periods