Fundamental Accounting assumptions
1. Going concern assumption, which states that operations will continue for the foreseeable future.
and the company has no plans to shut down; all transactions are documented in the books of accounts under the assumption that it is a continuing business; as a result, a distinction is made between capital and revenue expenditures; for example, machinery is recorded at cost and depreciated over its useful life without reference to market value.
2. Consistency Assumption: According to this assumption, an accounting concept should be applied consistently year after year after it has been chosen and adopted; that is, the accounting principle and method should not change from year to year. If a company uses different accounting
3.. Accrual concept: According to the Accrual Concept, a transaction is entered into the books of accounts at the time of entry rather than at the time of settlement.
• According to the accrual principle, income is recorded at the time of sales or service delivery; whether or not cash is received is irrelevant.• In a similar vein, whether or not cash is paid, an expense is recorded during the accounting period in which it helps generate revenue.
• For instance, income will be recorded in March rather than April if the shirt manufacturer sold items on March 30, 2016, and money was received on April 5.