Accounting Principles

Accounting Principles are the building blocks over which all the accounting system works. This is universally acceptable concepts which every entity around the world has to follow. If anyone decides not to follow the accounting principles, no one is going to accept his or her financial statements. These concepts help an accountant a lot in the preparation of financial statements as he or she cannot make his or her own judgments over the recording of financial transaction as these principles guide the accountant at every stage of accounting cycle. International Financial Reporting Framework (IFRS) and US GAAP (Generally accepted accounting principles) are the complex accounting principles which was made over the basic concepts as mentioned below:

  • Accrual concept
  • Going concern concept
  • Business entity concept
  • Monetary unit assumption
  • Time period principle
  • Revenue recognition principle
  • Full disclosure principle
  • Historical cost concept
  • Matching principle
  • Relevance and reliability
  • Materiality concept
  • Substance over form
  • Prudence concept
  • Understandability concept
  • Comparability concept
  • Consistency concept