Accounting Assumptions, Principles, and Constraints Hcemac XACC/280

·

There are three major guidelines that are used in the conceptual framework of accounting also known as assumptions, principles, and constraints. Assumptions provide a foundation for the accounting process (Weygandt, Kimmel & Kieso, 2008, p. 297).These include monetary unit assumption which states that only monetary data can be reported, economic entity assumption which states that entities such as the owner’s personal finances and the business must be reported separately and the same rule applies to more than one enterprise, the time period assumption states that a businesses economic life can be divided into time periods such as monthly, quarterly, or annually, and going concern assumption works on the basis that a company will operate long enough to complete its given objectives (Weygandt, Kimmel & Kieso, 2008) . The basic principles of accounting include revenue recognition which states that organizations should recognize revenue with-in the time period that it is earned. The matching principle state that expenses should be match to revenue in the time frame in which effort were made to generate the revenue. The full disclosure principle requires organizations to disclose pertinent information from financial statements to users (including investors) and the cost principle states the organizations must record assts at their cost (Weygandt, Kimmel & Kieso, 2008). There are two constraints in accounting that allow a modification in the general accounting principles without changing the usefulness of the information (Weygandt, Kimmel & Kieso, 2008, p. 303). These two constraints are materiality refers to an items impact on an organizations overall financial condition and operations (Weygandt, Kimmel & Kieso,