Assumptions behind financial statements

Financial Statements are generally prepared on Accrual basis of accounting.

Accrual Basis: Effects of transactions are recorded as and when they occur, irrespective of whether cash inflow or outflow happens. For example, if goods are purchased on Credit, the same is recorded as a purchase when the delivery from Vendor occurs, though the cash outflow may happen after the credit period.

Going Concern: Financial statements are normally prepared on the assumption that the Enterprise is a going concern and will continue operation for the foreseeable future.

Consistency: In order to achieve comparability of the Financial Statements over a period of time, it is essential that the Accounting Principles followed are consistent from one period to another - change in Accounting Policy is only on exceptional circumstances.

March 15, 2009 | Filed Under Fundamental Analysis

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One Response to “Assumptions behind financial statements”

rambhai.com on May 12th, 2009 1:15 pm

Assumptions behind financial statements…

Financial Statements are generally prepared on Accrual basis of accounting.

Accrual Basis: Effects of transactions are recorded as and when they occu…

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