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The three fundamental accounting assumptions are:
(i) Accrual
(ii) Conservatism
(iii) Consistency
(iv) Going Concern
(v) Matching
(i) Accrual
(ii) Conservatism
(iii) Consistency
(iv) Going Concern
(v) Matching
- a)(ii), (iii) and (iv)
- b),(i), (iii) and (iv)
- c)(ii), (iv) and (v)
- d)(iii),(iv) and (v)
Correct answer is option 'B'. Can you explain this answer?
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The three fundamental accounting assumptions are:(i) Accrual(ii) Conse...
Explanation:
1. Accrual:
The accrual assumption states that financial transactions and events should be recorded in the accounting records when they occur, regardless of when the cash is received or paid. This means that revenues should be recognized when they are earned, and expenses should be recognized when they are incurred. The accrual assumption ensures that financial statements provide a more accurate representation of a company's financial position and performance.
2. Conservatism:
The conservatism assumption states that when there are two acceptable alternatives for recording a transaction or event, the one that results in lower net income or a lower asset value should be chosen. This assumption helps to ensure that financial statements are not overstated and that potential losses are recognized as soon as they are probable. It helps to provide a more conservative and realistic view of a company's financial position and performance.
3. Consistency:
The consistency assumption states that once an accounting method or principle has been chosen, it should be consistently applied from one accounting period to another. This ensures that financial statements are comparable over time and allows users of the financial statements to make meaningful comparisons. Consistency also helps to maintain the integrity and reliability of the financial statements.
4. Going Concern:
The going concern assumption states that a company will continue to operate in the foreseeable future. This assumption allows for the preparation of financial statements under the assumption that the company will continue to operate and fulfill its obligations. It assumes that the company will not be forced to liquidate its assets at a distressed value and allows for the use of historical cost accounting methods.
5. Matching:
The matching assumption states that expenses should be recognized in the same period as the revenues to which they relate. This ensures that the expenses incurred in generating revenue are properly matched with the revenue they helped to generate. By matching expenses with revenues, the matching assumption helps to provide a more accurate measurement of a company's profitability.
Correct answer:
The correct answer is option 'B' - (i) Accrual, (iii) Consistency, and (iv) Going Concern. These three assumptions are considered fundamental because they provide the basis for preparing and presenting financial statements that are relevant, reliable, and useful to users. The conservatism and matching assumptions are also important, but they are not considered fundamental in the same way as the other three.
1. Accrual:
The accrual assumption states that financial transactions and events should be recorded in the accounting records when they occur, regardless of when the cash is received or paid. This means that revenues should be recognized when they are earned, and expenses should be recognized when they are incurred. The accrual assumption ensures that financial statements provide a more accurate representation of a company's financial position and performance.
2. Conservatism:
The conservatism assumption states that when there are two acceptable alternatives for recording a transaction or event, the one that results in lower net income or a lower asset value should be chosen. This assumption helps to ensure that financial statements are not overstated and that potential losses are recognized as soon as they are probable. It helps to provide a more conservative and realistic view of a company's financial position and performance.
3. Consistency:
The consistency assumption states that once an accounting method or principle has been chosen, it should be consistently applied from one accounting period to another. This ensures that financial statements are comparable over time and allows users of the financial statements to make meaningful comparisons. Consistency also helps to maintain the integrity and reliability of the financial statements.
4. Going Concern:
The going concern assumption states that a company will continue to operate in the foreseeable future. This assumption allows for the preparation of financial statements under the assumption that the company will continue to operate and fulfill its obligations. It assumes that the company will not be forced to liquidate its assets at a distressed value and allows for the use of historical cost accounting methods.
5. Matching:
The matching assumption states that expenses should be recognized in the same period as the revenues to which they relate. This ensures that the expenses incurred in generating revenue are properly matched with the revenue they helped to generate. By matching expenses with revenues, the matching assumption helps to provide a more accurate measurement of a company's profitability.
Correct answer:
The correct answer is option 'B' - (i) Accrual, (iii) Consistency, and (iv) Going Concern. These three assumptions are considered fundamental because they provide the basis for preparing and presenting financial statements that are relevant, reliable, and useful to users. The conservatism and matching assumptions are also important, but they are not considered fundamental in the same way as the other three.
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The three fundamental accounting assumptions are:(i) Accrual(ii) Conse...
BECAUSE THESE ARE THE BASIc ASSUMPTIONS OF ACCOUNTANCY.
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