Fundamental Accounting Assumption notes

Auditing and Assurance Revision Questions and Answers

These are the fundamental assumptions, which underlie the preparation and presentation of financial statements. These are not specifically stated because its acceptance and use are assumed. Disclosure is necessary if these are not followed. The following have been generally accepted as fundamental accounting assumptions.

 Going Concern: The enterprise is normally viewed as a going concern, that is as continuing in operation for the foreseeable future.

 Consistency: It is assumed that accounting policies are consistent from one period to another

 Accrual: revenue and costs are accrued, that is recognized as they are earned or incurred and recognized in the financial statements of the period to which they relate.
If the fundamental accounting assumptions, viz., Going concern, Consistency and Accrual are followed in financial statements specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact should be disclosed.

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