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Relationship Between Accounting Assumption, Principles, and Theories

In: Business and Management

Submitted By feeqa90
Words 934
Pages 4
The objective of this individual assignment is to understand the relationship between accounting assumption, principles and how does they assist in financial reporting. It is also to understand what types of accounting theory that relevant with the accounting principles. Going concern assumption is one of accounting assumptions which is about financial activities of a business are assumed to be in operation for long period of time. This assumption is allows a business to operate in long term view. This assumption is very critical where there is no short term end of point. (Simple studies, 2010). Full disclosure principle is one of accounting principles that constitute with going concern assumption. The principle is about all past, present and future information that may have made an impact on the financial performance of the company needs to be fully disclosed. Even though the historical performance of company is readily available, but the numbers does not always provide the entire picture of company. Full disclosure of information is need because it is reflect the economic condition of company. This principle is also important in order to assist decision maker to make decision. (Simple studies, 2010). In this condition where full disclosure principle is coherent with going concern assumption can be relate with accounting rule FRS136, which is about impairment of assets. This standard is to ensure the values of assets are disclosed in the balance sheet, where the carrying amounts are not stated higher than their recoverable amounts. Impairment of assets occurs when the recoverable amount is lower that the carrying amount. Hence, the standard requires that an entity test for impairment. (ACCA, 2008). FRS 136 is related with going concern assumption because company assumed to operate their business without insolvency for indefinite period of time, which means...

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