The business will continue to operate in the future, (future economic benefit of the asset) – the business is ongoing so must determine profit in periods of time
Period assumption
Reports are prepared for a period of time so net profit/loss can be calculated
Accrual basis assumption
ALL revenues and expenses are recorded for the period
Revenues
Increases in assets or decreases in liabilities that result in increases in owners equity, other than those relating to contributions from the owner
Expenses
Decreases in assets or increases in liabilities that result in decreases in owners equity, other than those relating to distributions from the owner
Balance day adjustment (BDA)
A change made to a revenue or expense account on balance day so that revenue accounts show revenues earned and expense accounts show expenses incurred in a particular period
