ASSUMPTIONS

1. Accounting Entity- business is considered as an entity that is separate and
distinct from the owner and management.

2. Going-Concern Assumption- the business is assumed to have a continuous
life of existence.

3. Time Period Assumption- the life of the business is divided into equal
periods called Accounting Period.

a. Calendar Year – January 1 to December 31
b. Fiscal Year- starts from any month except Jan. and ends on its
12th month afterwards
c. Natural Business Year- a 12 month period that ends on any
month when the business is at the lowest or slack season

4. Unit of Measure- “ the country’s currency”

5. Accrual Basis- income is recognized when earned.
Expense is recognized when incurred