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Explain: four basic assumptions of financial accounting

Please help explain the meaning of the four assumptions underlying financial accounting structure? Include some examples to stress the importance of the basic assumptions. Provide 3 or 4 sentences to explain each of the assumptions.

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The four basic assumptions are:

1. economic entity
2. going concern
3. monetary unit
4. periodicity

1. The economic entity assumption simply means that the economic activity can be identified with an enterprise or business separate from its owners and separate from any other business activity. The concept doesn't necessarily mean legal separateness. It is a selected and defined group of economic ...

Solution Summary

This posting helps with financial accounting. The solution explains the meaning of the four assumptions including some examples to stress the importance of the basic assumptions. There are 3 or 4 sentences in explanation of each of the assumptions. The four basic assumptions explained in this solution are economic entity, going concern, monetary unit and periodicity.

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