Running head: ASSUMPTIONS OF ACCOUNTING

Assumptions of Accounting Cheryl A. Young

December 21, 2012

ASSUMPTIONS OF ACCOUNTING

Assumptions of Accounting The GAAP is a set of policys along with constraints that the rules of accounting are set by. These rules and regulations dictate accounting and the assumptions of it. Some of the assumptions of accounting are a company is separate part as in a separate entity, a company and their assets and liabilities are valued in currency. Also, a companys length or better known as a lifespan of a business can be split into accounting periods that are equal. The principals of accounting are a little bit different; the principals are affected by the economic and political conditions (Weygandt & Kiesco, 2008). They consist of revenue recognition is when a sale is made; matching a principal is the expense and revenue; full disclosure means the circumstances and events must be disclosed (Weygandt & Kiesco, 2008), and cost. Constraints of accounting are the operating guidelines to which a company must abide by. Constraints are the accounting process and allow for some of the principals to be a little lax under certain circumstances (Weygandt & Kiesco, 2008). Financial reporting is to make sure customers are guarded with advice and a lot of information on fianacial reports when looking into investments. This is something that they will make decisions on with their credit that car put their fiannacial situation in jeopardy. Constraints in sound reporting of finances will always be there. However, cost-benefit and materiality are constraints. The benefit means collecting, analyzing, along with discussing the information provided in the financial report. This must all be balanced out. Materiality is another big constraint it is thought of that materiality can make a big difference in the relationship (Investments, 2012).

ASSUMPTIONS OF ACCOUNTING

References Investments. (2012). Retrieved from http://www.investopedia.com/terms/g/gaap.asp#axzz2FqXnCbTf Weygandt, J., & Kiesco, D. (2008). Financial Accounting (6th ed.). Hobobken, NJ: Wiley and Sons INC..