Basic Accounting According to Experts

This time we will discuss the basic assumptions of accounting according to experts along with accounting principles.

As we know, the purpose of accounting is to provide information in the form of financial reports that is useful for various interested parties.

In order for this objective to be realized, the preparation of reports must be based on basic accounting assumptions. Then what is the basic assumption? Next, we will explain some basic assumptions according to specific institutions …

Table of contents :

Assumptions According to GAAP (Generally Accepted Accounting Principles)

1. The Assumption of Business Unity
2. Business Continuity Assumptions
3. Assumption of Timely Periodization
4. Assumptions in Monetary Unit Measurement
5. Assumptions of Business Fairness
6. Assumptions of Reliability
7. Consistency of Assumptions
8. Accrual Assumptions

Assumptions According to the AICPA (Institute of Certified Public Accountans)

Assumptions According to the Accounting Standard Guidelines (SAK)

Accounting Principles

1. Cost Principles

2.The principle of revenue recognition (revenue recoqnition)

3. The Principle of Meet (Matching Principle)
4. The Principle of Comparison of costs – income (Matching Principle)
5. Full disclosure principles

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Assumptions According to GAAP (Generally Accepted Accounting Principles)

Here are some basic accounting assumptions according to GAAP (Generally Accepted Accounting Principles):

1. The Assumption of Business Unity

Accounting which treats the company separately from its owners and managers. And this accounting only records transactions related to the company

2. Business Continuity Assumptions

This accounting assumes that the company can always run for hours. Under this assumption, the company’s assets will divide it in the long term and share its liabilities in the short and long term

3. Assumption of Timely Periodization

Assumptions that assume the life of the company will be sustainable. And on this basis, the financial statements will be published on a period basis in a consistent time period

4. Assumptions in Monetary Unit Measurement

This accounting is only in the form of quantitative notes and reports which are expressed in monetary units.

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5. Assumptions of Business Fairness

In this assumption, both parties are involved in the transaction, the buyer and the seller work independently, freely and rationally. Each party should try to reach an agreement to satisfy both parties.

6. Assumptions of Reliability

Accounting here only records adequate proof of transactions and only presents reliable financial reports for interested persons.

7. Consistency of Assumptions

Accounting here believes that a consistent method of accounting should be used from period to period, but can also be replaced as long as the method is more appropriate.

8. Accrual Assumptions

This accounting uses an accrual basis, where the recognition of receipts appears when received and the recognition of expenses can occur when used / without cash.

Assumptions According to the AICPA (Institute of Certified Public Accountans)

Next we will discuss the basic assumptions according to the American Institute of Certified Public Accountants (AICPA):

Government and Society will guarantee private property rights

Unity in a more specific endeavor

Business continuity

Use of monetary units across multiple accounts

Consistency between periods within the same business entity

Conservative

Enough means

It differs in accounting among other free entities

Reliance on data coming from internal controllers

Deadlines under control that require forecasting

Assumptions According to the Accounting Standard Guidelines (SAK)

Basic accounting assumptions that are consistent with the Accounting Standards or IFRS Guidelines;

Cash basis – the basis for determining the recording of transactions if the transactions give rise to changes in cash

Accrual Basis – the accounting basis that recognizes the existence of transactions and other events in those events. Then the transaction will be recorded in the accounting records and will be reported at a certain period.

The concept of the entity – the basis of accounting that must apply to all economic units separately. Thus events involving an economic unit should not be mixed with other units even if they are the owners

Going Concern  –  financial statements that assume that the company will certainly continue in business in the future. For further explanation, please also read here: Business Continuity Assumptions or Concepts

Monetary unit – all economic transactions expressed in a specific currency

Accounting period –  the financial statements of a company that must be reported periodically and divided into certain periods

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Accounting Principles

basic accounting assumptions

Basically there are 4 accounting principles as follows.

1. Cost Principles

The cost principle emphasizes that assets are recorded at cost (cost principles).

2.The principle of revenue recognition (revenue recoqnition)

The revenue recognition principle emphasizes that revenue must be recognized when the period of revenue occurs.

3. The Principle of Meet (Matching Principle)

The principle of unifying this is to combine costs with income arising from costs incurred.

4. The Principle of Comparison of costs – income (Matching Principle)

The principle of cost-income comparison emphasizes that the revenue recognition must be compared with the smallest expense in the same period.

5. Full disclosure principles

In this principle, it emphasizes that financial statements must be presented in full, fair (fair) and adequate (adequate).