Accounting Principles

Accounting follows a certain framework of core principles which makes the information generated through an accounting system valuable. Without these core principles accounting information such as balance sheet and income statement of a company would be irrelevant and unreliable and irrelevant.

These principals include:

  1. Accrual Concept
  2. Going Concern Concept
  3. Business Entity Concept
  4. Monetary Unit Assumption
  5. Time Period Principle
  6. Revenue Recognition Principle
  7. Full Disclosure Principle
  8. Historical Cost Concept
  9. Matching Principle
  10. Relevance and Reliability
  11. Materiality Concept
  12. Substance Over Form
  13. Prudence Concept
  14. Understandability Concept
  15. Comparability Principle
  16. Consistency Concept

Accounting principles are the building blocks that form the basis of more complex and specialized rules such as country specific GAAP i.e. generally accepted accounting principles and other standards, most used of them being the International Financial Reporting Standards. These standards deal with matters like accounting for revenue, accounting for taxes, accounting for business combinations, etc.

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