Please help me explain the following concepts:
- The basic assumptions of accounting
- The principles of accounting
- The constraints of accounting
- A conclusion stating how you think sound financial reporting depends on principles, assumptions, and constraints. Refer to the U.S. GAAP in your response.
Let's discuss each area, and I will provide you with resources throughout the discussion. This will help you as you write your essay.
There are seven accounting assumptions, which can be found here: http://www.accountingtools.com/questions-and-answers/what-are-the-key-accounting-assumptions.html
The seven assumptions, which actually have no particular order, are: accrual, conservatism, consistency, economic entity, going concern, reliability, and the time period assumption. The most misunderstood assumption is the going concern assumption. The going concern assumption assumes that an entity is financially stable and viable enough, to the point where investors can have confidence that the business will remain open in the near, foreseeable future. Going concern is a positive statement, ...
This section explains the listed accounting concepts in detail. Each area is explained, along with a thorough conclusion on how financial reporting relies on assumptions, constraints, and principles. This discussion is based on GAAP, as requested.