ACC Assumptions and Qualitative Characteristics

In relation to accounting, the 'Assumptions' are:

• estimates made when deciding to give credit to customers
• basic rules, concepts or regulations on which accounting decisions are based
• estimates of the financial future of a business

The Accounting Entity Assumption:

• divides the life of a business into arbitrary time periods
• requires all revenues and expenses to be recorded in the financial year they relate to
• presumes that a business is a separate entity to its owner

The Accounting Period Assumption:

• divides the life of a business into arbitrary time periods
• requires all revenues and expenses to be recorded in the financial year they relate to
• presumes that a business is a separate entity to its owner

The Matching Principle:

• divides the life of a business into arbitrary time periods
• requires all revenues and expenses to be recorded in the financial year they relate to
• presumes that a business is a separate entity to its owner

The Historical Cost Assumption refers to the recording of items at their original cost.

• true
• false

The qualitative characteristics of accounting are those:

• attributes that financial information should possess to be included in the financialreports
• that show the business is one of high quality
• that show that the accountant has special qualities

The three main qualitative characteristics of accounting are:

• attitude, reference, and reflection
• predictability, relevance, and reliability
• relevance, reliability, and materiality

Relevance means financial information:

• assists users to make decisions about how the business has been run or should be run
• is free from bias (it is objective) and errors
• includes information that is necessary

Reliability means financial information:

• assists users to make decisions about how the business has been run or should be run
• is free from bias (it is objective) and errors
• includes information that is necessary

Materiality means financial information:

• assists users to make decisions about how the business has been run or should be run
• is free from bias (it is objective) and errors
• includes information that is necessary