Whether in bookkeeping and or accounting, the accounting student must know the different types of accounting assumptions, principles and constraints. Below are tabulate in easy reference for those who want to have a quick review of these accounting concepts/principles,assumptions and constraints.
|ACCOUNTING ENTITY OR BUSINESS ENTITY OR ECONOMIC ASSUMPTION||The business is a separate entity from its owners.|
|ACCOUNTING PERIOD OR TIME PERIOD ASSUMPTION||The indefinite life of a business entity is divided into accounting periods for the purpose of preparing financial reports.|
|GOING CONCERN ASSUMPTION||The assumption that a business will operate indefinitely.|
|MONEY MEASUREMENT OR MONETARY UNIT ASSUMPTION||Refers to the identification and measurement of economic events in financial terms ( say in USD).|
|FULL DISCLOSURE PRINCIPLES||Enough information must be reported to help users make knowledgeable decisions.|
|HISTORICAL COST PRINCIPLE||Historical cost concept-where all transactions are recorded at the original cost to the business.|
|MATCHING PRINCIPLE||Matching principle/concept-revenue earned during an accounting period has to be matched with the expenses associated with the revenue generated|
|REVENUE RECOGNITION PRINCIPLE||Recognize revenue when it is earned, not too early and not too late.|
|MATERIALITY CONSTRAINT||Significant items must be accurately measured.|
|Prudence or Conservatism CONSTRAINTS||Prudence concept-considers that it is prudent neither to overstate profits and assets nor understate losses and liabilities.|
- Answer to FA Test No 1 & 2 on Accounting Concepts & Regulatory Framework
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- Answer To Financial Accounting Question Paper FA No 4: Test on Accounting Concept & Regulatory Framework
- WHAT ARE THE UNDERLYING ASSUMPTIONS AND CONSTRAINTS IN THE PREPARATION OF THE FINANCIAL STATEMENT. ALSO EXPLAIN WHAT ARE THE DIFFERENCE BETWEEN ACCOUNTING POLICIES AND ACCOUNTING PRINCIPLES.
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