CBSE Class 11-commerce Answered

The three basic accounting assumptions are as follows:

1. Going Concern Concept: Going concern assumes that the business will run its operation for a longer period of time and transactions recorded are from this point of view. This business would not be liquidated in the foreseeable future. For example, purchased land and machinery worth Rs. 120,000 and its estimated life span is, say about 8 years. The cost of purchase expense is, then, not accounted completely in the year of purchase. But this expense is spread over next 8 years to ascertain profit and loss for each year. 
2. Consistency Concept: Accounting policies and practices followed by an enterprise should be uniform and consistent over a period of time. For example, if an enterprise follows different methods in two years for depreciation of its assets, then the financial information will not be comparable. Hence, the personal bias gets eliminated through the practice of consistency. However, consistency does allow changes in accounting policies but it should be disclosed.
3. Accrual Concept: Accrual basis accounting is the practice of recording revenues when they are earned and recording expenses when they are owned. For example, consumption of raw materials is matched against the cost of output sold for the accounting period. Thus, revenues and costs are recognised in the period in which they occur rather than when they are paid.