The Conceptual Framework outlines two underlying assumptions of financial statements.These are:
A)fair value basis and insolvency assumption.
B)accrual basis of accounting and going concern assumption.
C)cash basis of accounting and insolvency assumption.
D)historical cost accounting and limited life concept.

Question

Quizplus · Accepted Answer

The two underlying assumptions of financial statements are the accrual basis of accounting and going concern assumption. The accrual basis of accounting assumes that transactions and events are recognized when they occur and not when cash is received or paid. The going concern assumption assumes that the entity will continue to operate in the foreseeable future. Both of these assumptions are essential for the preparation of reliable financial statements.

The Conceptual Framework Outlines Two Underlying Assumptions of Financial Statements