Explain any three Accounting Assumptions.
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Answer:
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Explanation:
The three main assumptions we will deal with are – going concern, consistency, and accrual basis.
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Assumptions
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Assumptions
Related Terms: Forecasting
An assumption is a statement that is presumed to be true without concrete evidence to support it. In the business world, assumptions are used in a wide variety of situations to enable companies to plan and make decisions in the face of uncertainty. Perhaps the most common use of assumptions is in the accounting function, which uses assumptions to facilitate financial measurement, forecasting, and reporting.
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There are four basic types of assumptions used regularly in accounting. They are:
1. The separate-entity assumption, which holds that the particular business entity being measured is distinct and separate from similar and related entities for accounting purposes.
2.The continuity or going concern assumption. This assumption holds that the entity will not cease operations or liquidate its assets during the accounting period.
3.The time-period assumption. According to this assumption, accounting reports are assumed to apply to a short time period, usually one year.
4. The unit-of-measure assumption which is sometimes referred to as the stable monetary unit assumption. This assumption holds that the U.S. dollar is the common denominator or measuring stick for all accounting measurements taken for American companies.