If nothing is written in the financial statements about the three fund...
If nothing is specifically mentioned in the financial statements about the three fundamental accounting assumptions (going concern, consistency, and accrual), it is generally presumed that: B: They have been followed.
The assumption is that these fundamental principles are adhered to when preparing financial statements unless explicitly stated otherwise. This presumption allows for uniformity and comparability across different financial statements.
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If nothing is written in the financial statements about the three fund...
The three fundamental assumptions in accounting are the going concern assumption, the monetary unit assumption, and the time period assumption. These assumptions provide the foundation for preparing financial statements and interpreting financial information.
If nothing is written in the financial statements about these assumptions, it indicates that they have been followed. This is because if any of these assumptions were not followed, it would be required to disclose the departure from the assumption in the financial statements. Therefore, the correct answer is option 'B' - They have been followed.
Let's understand each assumption and why it is important in financial reporting:
**1. Going Concern Assumption:**
This assumption states that an entity will continue to operate in the foreseeable future, and there is no intention to liquidate or significantly curtail its operations. It assumes that the entity will continue its activities long enough to realize its assets and discharge its liabilities in the ordinary course of business. This assumption is important because it allows the financial statements to be prepared on the basis that the entity will continue to operate, and assets and liabilities are reported at their carrying amounts rather than their liquidation or fire-sale values.
**2. Monetary Unit Assumption:**
This assumption states that the financial statements are prepared in a currency that is stable and widely accepted as a medium of exchange. It assumes that the value of money remains constant over time, ignoring the effects of inflation or deflation. This assumption allows for the aggregation and comparison of financial information over different periods and entities. Without this assumption, it would be difficult to make meaningful comparisons and analyze financial data.
**3. Time Period Assumption:**
This assumption states that the life of an entity can be divided into artificial time periods, such as months, quarters, or years, to provide timely and relevant financial information. It assumes that financial statements are prepared at regular intervals to meet the needs of users. This assumption allows for the measurement and reporting of financial performance and financial position over specific time periods, facilitating decision-making and analysis.
In conclusion, if nothing is written in the financial statements about the three fundamental assumptions, it indicates that they have been followed. The absence of any disclosure regarding departure from these assumptions suggests that the financial statements have been prepared on the basis of these assumptions, as required by accounting standards and principles. Therefore, option 'B' - They have been followed, is the correct answer.
If nothing is written in the financial statements about the three fund...
C is correct