Accounting assumptions

Modern accounting is based on certain assumptions for keeping systematic record of financial transactions. The Accounting concept refers the basic accounting rules and assumptions for recording financial transactions .Without accounting concept, we cannot keep systematic and proper accounting. Some of the basic accounting concepts or assumptions are as follows:

a)Business Entity concept:
According to this concept, business organization and the owner of the business are two different entities. So, business transactions are recorded in books of account of business organization and not in the books of account of its owner .By this concept, a business has nothing to do with the personal transaction of its owner.

b)Going concern concept: According to this concept, a business is considered as a going concern. It means the business will continue to operate for a long period of time. The transactions of the business, therefore, are also recorded on the assumption that it is a continuing enterprise. It is because of this concept that fixed assets are recorded at their original cost and depreciation is charged on these assets without considering their market value.

c)Cost concept: This concept is closely related to going concern concept. According to this concept, the cost of goods and services are recognized when they are incurred and recorded at their costs. Similarly, the fixed assets are recorded in the books of account at the cost price at which they are purchased rather than their market price