Fundamental Accounting Assumptions

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      Financial statements are prepared keeping in mind certain fundamental assumptions. Accounting Standard (AS-1) issued by the Institute of Chartered Accounts of India States that the following have been accepted as fundamental Accounting Assumptions:-




   a) Going Concern:- The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of operations.

b) Consistency:- It is assumed that Accounting principles are consistent from one period to another.

c) Accrual:- Revenue and costs are accrued, that is recognised as they are earned or incurred and recorded in the financial statements of the period to which they relate.


      The significance of fundamental assumptions is that need not be specifically stated since it is assumed that the accountant has followed them while preparing the financial statements. Disclosure is necessary as a note to the financial statements if they have been followed.

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