How does Terraform knows which AWS account to apply the changes

Coming from Terraform GCP to AWS, I am wondering how does Terraform knows which AWS account to apply the changes to? In GCP, you can assign a project id to the resource/provider so that i know exactly which project Terraform will apply the changes to.

For setting up Terraform for AWS, the plan is to use assume role. Is this the best practice to setup multiple accounts? (We only have 2 account, ideally i think it is better to have a separate dev-ops account )

1. Create a terraform-role in both dev and prod account.
2. Create a user infra-user in dev account.
3. Setup trust policy between terraform-role in dev/prod account and user infra-user
4. Use variable to toggle between dev/prod in the Terraform AWS assume role.

I am guessing when Terraform assumes the role, it also assumes to create the resources in that account?

In AWS, the target account for operations is always implied by the principal (user or role) that's making the API call. If you use sts:AssumeRole (or similar) and then make API calls with the resulting dynamic credentials then you'll be making requests against the account that the target role belongs to, rather than as the account that your original principal (the one that assumed the role) belongs to.

AWS APIs don't typically take an account ID as part of the request, so there isn't any direct analog to associating each object with a project in GCP. This is more a design detail of AWS itself than of the hashicorp/aws provider for Terraform.

However, you can help ensure that you keep your account IDs in order by setting the allowed_account_ids argument in your provider "aws" block(s). If you set that then before making any other requests the AWS provider will call sts:GetCallerIdentity and make sure that the Account indicated in the response matches one of those given in allowed_account_ids, returning an error if not.