Fundamental Accounting Assumptions

Fundamental Accounting Assumptions are basic principles that underlie the preparation and presentation of financial statements. These assumptions are considered to be the foundation of accounting and are widely accepted in the accounting profession. The three fundamental accounting assumptions are:

1. Going Concern: This assumption states that an entity will continue to operate in the foreseeable future. It assumes that the entity will not be forced to liquidate its assets or cease its operations due to financial difficulties.

2. Consistency: This assumption states that an entity will use the same accounting methods and procedures from period to period. It ensures comparability of financial information over time.

3. Accrual: This assumption states that transactions are recorded when they occur, regardless of when the cash is received or paid. It ensures that financial statements represent the economic reality of the business.

Answer Explanation

The correct answer is C. Conservatism is not a fundamental accounting assumption. Conservatism is a principle that requires accountants to be cautious in their financial reporting by recognizing losses and liabilities as soon as possible, but delaying the recognition of gains and assets until they are realized. While conservatism is an important accounting principle, it is not one of the fundamental accounting assumptions.

Answer C