Chapter 1 - AA's

Question 1

Period Assumption

Answer 1

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

Question 2

Accrual Basis Assumption

Answer 2

the assumption that revenues are recognized when earned and expenses are recognised when incurred, so profit is calculated as revenue earned in a particular period less expense incurred in that period

Question 3

Going Concern Assumption

Answer 3

the assumption that the business will continue to operate in the future, and its records are kept on that basis

Question 4

Accounting Entity Assumption

Answer 4

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