Question

Name the two main underlying assumptions of accounting

Answer 1

The two main underlying accounting assumptions are given below:

1. The going concern concept is based on the principle that the entity is a going concern and will continue in operation for the foreseeable future. Therefore, unless it is known otherwise, it is assumed that the entity is not intending to close down or significantly reduce its activities.

2. The economic entity assumption is an accounting principle that separates the transactions carried out by a business entity and its owner. It could also apply to various divisions within the same company. Each unit must maintain separate accounting records that specifically pertain to its business operations.

Other Accounting Assumptions are : The periodicity assumptions, The monetary unit assumptions.