Consider the following statements relating to how we might account for certain transactions or events. What accounting assumption or principle underlies each?

1. Accounting financial statements are primarily based on historical costs.

2. At the end of each period, a company has to calculate any salaries that have accrued, and recognise an expense and a liability for that amount.

3. If a company changes its depreciation policy, it needs to disclose (in the notes to the financial statements) the nature of the change, and its financial effects.

4. If a company issues new shares this is recorded in the company’s books. However, a sale of the company’s shares from one shareholder to another is not.