Accounting Assumptions, Principles & Constraints
Greg Young
XACC/280
03/10/2013
Salena Ford

Accounting assumptions provide a foundation for the accounting process. There are three major assumptions; the monetary unit, economic entity, and time period assumptions. The fourth assumption is the going concern assumption. The Monetary Unit Assumption makes it mandatory that only transaction data that can be expressed in terms of money be included in the accounting records. The reason for this is so that a company does not put a dollar value on something that cannot be expressed easily, such as the president of a company. The Economic Entity Assumption states that the activities of an entity be kept separate and distinct from the activities of the owner and of all other economic entities. An example of this would be the assumption that the activities of Budweiser are different from other breweries such as Coors or Guinness. The Time Period Assumption states that the economic life of a business can be divided into artificial time periods. This assumption is stating that companies are able to divide their activities in months or quarters for financial reporting purposes. The Going Concern Assumption assumes that a company will continue to operate long enough to complete their existing objectives.

Accounting principles area basically a guideline on how to properly record and report economic events. The revenue recognition principle dictates that companies should recognize revenue in the accounting period in which it is earned. In other words, do not record revenues in a timeframe that were not collected until another time frame. The Matching Principle (Expense Recognition) dictates that companies match expenses with revenues in the period in which efforts are made to generate revenues. The Full Disclosure Principle requires that companies disclose