ACCTG 101 Lecture Notes - Lecture 1: Retained Earnings, Income Statement, Matching Principle
Document Summary
The purpose of accounting is to identify, measure and communicate economic information about a particular entity to interested users. As a foundation for accomplishing this purpose, accountants make the following four assumptions: Time period assumption business owners and other interested parties usually do not want to wait too long before they receive information about how a business is doing. They want periodic measurements of the business" success or failure. Accountants therefore assume that economic information can be meaningfully captured and communicated over short periods of time, even if those time periods are somewhat artificial. Monetary unit assumption accountants assume that the dollar is the most effective means to communicate economic activity. If an economic activity cannot be expressed in dollars, then it is not recorded in the accounting system. Going concern assumption accountants assume that a company will continue to operate into the foreseeable future. This assumption enables accountants to use certain techniques.
