Acc def Accounting assumptions

• Qualitative characteristics of accounting reports


  • Timeliness
  • Understandability
  • Relevance
  • Faithful representation
  • Comparability
  • Verifiability
• Timeliness


  Information should be available to decision-makers in time for useful decision-making
• Understandability


  Accounting information should be presented in a format understandable by users with reasonable knowledge of business and economic activities so they can comprehend their meaning. Info should be clear and concise.
• Relevance


  Financial information should help users make decisions by forming predictions about past, present, or future events
• Faithful representation


  Information reported must be a faithful representation of the real-world economic event it represents. must be complete and without bias
• Comparability


  Users should be able to identify similarities and differences in financial reports with other entities or over different reporting periods bc of consistent accounting standards and polocies.
• Verifiability


  Financial information should be supported by evidence to check its accuracy
• Accounting assumptions


  • Period assumption
  • Accrual Basis
  • Going Concern
  • Accounting Entity
• Period assumption


  The ongoing life of the business is divided into equal, arbitrary reporting periods to compare results, measure performance, and prepare reports which should reflect period in which transaction occurs. revenue earned is compared with expenses incured to calculate profit for reporting period
• Accrual Basis


  Profit is determined by subtracting expenses incurred from revenue earned in the same period. Revenue recognised when earned, not when the cash is received whereas expenses are recognised when incurred, not when cash is paid.
• Going Concern


  A business will continue to operate and records are kept on this basis
• Accounting Entity


  A business has its own financial status and is completely separate from its owner and other entities