Unidad 8 Finanzas Traducci N

8 Accounting assumptions and principles.
Assumptions
When writing accounts and financial statements, accountants to follow a number of assumptions, principles and conventions. An assumptions issomething that is generally accepted as being true. The following are the main assumptions used by accountants:
The separate entity or business entity assumptions is that a business is an accounting unitseparate from its owners, creditors and their assets. These people can all change, but the business continues as before.
The time-period assumptions states that the economic life of the business canbe divided into (artificial) time period such as the financial year, or a quarter of it.
The continuity or going concern assumptions says that a business will continue into the future, so the currentmarket value of its assets is not important (see unit 7).
The unit-of-measure assumptions is that all financial transactions are in a single monetary unit or currency. Companies with subsidiaries-that is, other companies that they own-in different countries have to convert their results into one currency in consolidated financial statements for the whole group of companies.
Principles
Thefollowing are the most important accounting principles (as well as the consistency principle and the historical cost principle, mentioned in unit 7):
The full-disclosure principle states that financialreporting must include all significant information: anything that makes a difference to the users of financial statements.
The principle of materiality, however, says that very small and unimportantamounts do not need to be shown.
The principle of conservatism is that where different accounting methods are possible , you choose the one that is least likely to overstate or over-estimate assets orincome.
The objectivity principle says that accounts should be based on facts and not on personal opinions or feelings. Accounts, therefore, should be verifiable: it should be possible for internal and...