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concepts - CONCEPTS OF ACCOUNTING Written by Professor...

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CONCEPTS OF ACCOUNTING © c o n c e p t s . d o c Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM Please observe all copyright laws ASSUMPTIONS OF ACCOUNTING: 1. Economic (separate) entity – the transactions of the business are to be kept separate from those of the owner’s. The financial statements are to reflect (show) only business assets, liabilities, revenues, expenses, etc. 2. Monetary unit (unit of measure) – only those business events (transactions) that are financial in nature (expressed in dollars and cents in the USA) are to be recorded in the books of the company; also disregard any effects of inflation or deflation. 3. Periodicity (time period) - the life of a business can be arbitrarily broken into yearly time intervals without material distortion of reported amounts. 4. Going concern (continuity) – business has an unlimited life unless it is known to be otherwise. PRINCIPLES OF ACCOUNTING:
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