Qualitative Characteristics and
Accounting Assumptions Year 11 Vce
Accounting MPSC
Period Assumption - answer Requirement that the financial activities are reported for a
periods of time, known as reporting periods. Max length is 12 months
Accrual Accounting Assumption - answer Revenue should be recorded when it's earned
and expenses should be recorded when they are incurred
Going Concern Assumption - answer The business will continue to operate and not be
wound up in the future
Entity Assumption - answer Requirement that records of business are kept separate
from the owner and from other entities
Timeliness - answer Information is only valuable if it can be provided in a timely manner
Understandability - answer Information must be presented so people with reasonable
knowledge of business can understand it
Relevance - answerInformation that is capable of affecting decision making of users of
the report
Faithful Representation - answerInformation must faithfully represent the economic
events being reported
Comparability - answerConsistent accounting methods should be used so that
differences in accounting reports can be identified
Verifiability - answerInformation should be presented accurately and be supported by
evidence such as documents
Accounting Assumptions Year 11 Vce
Accounting MPSC
Period Assumption - answer Requirement that the financial activities are reported for a
periods of time, known as reporting periods. Max length is 12 months
Accrual Accounting Assumption - answer Revenue should be recorded when it's earned
and expenses should be recorded when they are incurred
Going Concern Assumption - answer The business will continue to operate and not be
wound up in the future
Entity Assumption - answer Requirement that records of business are kept separate
from the owner and from other entities
Timeliness - answer Information is only valuable if it can be provided in a timely manner
Understandability - answer Information must be presented so people with reasonable
knowledge of business can understand it
Relevance - answerInformation that is capable of affecting decision making of users of
the report
Faithful Representation - answerInformation must faithfully represent the economic
events being reported
Comparability - answerConsistent accounting methods should be used so that
differences in accounting reports can be identified
Verifiability - answerInformation should be presented accurately and be supported by
evidence such as documents
