Financial Accounting/Financial Statements/Underlying Assumptions

According to the Framework of IAS/IFRS, the underlying assumptions for the preparation of financial statements are:

Accrual basis The financial statements are prepared under the accrual basis. According to accrual basis of accounting, the effects of transactions and other events are recognized when they occur and not when the cash is received or paid. In other words, the transactions are recorded in the books of accounts when they occur and not when the cash is received or paid. It is opposite to cash basis of accounting.

Going concern basis The financial statements are prepared under the going concern basis. Under going concern basis, it is assumed that the enterprise will continue in operation for the foreseeable future, and the enterprise has neither the intention nor the need to liquidate or curtail materially the scale of its operations.