Separated/ Economic Entity.

SEPARATED/ ECONOMIC ENTITY. This implies that the business is separate from its owners and therefore should be treated as a legal person in its own right thus the transaction that involves the owners’ private life shall not be recorded in the financial statements in the business entity.

GOING CONCERN. Companies operate as a going concern which means that it will never cease to operate for the foreseeable future (ie. The business will operate as long as it has the financial backing.)

UNIT OF MEASURE/ MONETARY UNIT ASSUMTION Business entities must report its financial report in terms of a monetary unit that is a stable measure without a change in value. However a conversion can be made in order to facilitate comparison among countries.

TIME PERIOD. This is a time frame in which the financial statements are created. It does not have to follow the calendar year and it can be divided in artificial time periods.