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What are Accounting Principles?

by Team Goseeko

Accounting Principles are the general rules and guidelines that companies must follow when reporting all accounting and financial data.

Currently, there is no universally standardized and accepted accounting principle, but there are various accounting frameworks that set up a standard organization.

Examples of Accounting Principles

Conservatism Principles

Firstly, In situations where there are two acceptable solutions for reporting items, accountants need to “play safely” by choosing less favorable results.

Consistency Principles

Secondly, the Consistency Principles states that once the decision on an accounting method or principle to use in your business taken , you must stick to and follow this method throughout the accounting period.

Cost Principle

Moreover, a company must record assets, liabilities, and capital at the original cost of purchase or sale.

Agent Principles

However all business transactions must be retained and processed separately from their owners and other business transactions.

Complete Disclosure Principles

Further more important information that may affect a reader’s understanding of a company’s financial statements must be disclosable or included with the financial statements.

Going Concern Principle

A concept that assumes that a business will survive, operate for a foreseeable future, and will not be liquidated.

Matching Principles

The concept that each recorded revenue must be matched and recorded at the same time as all associated costs.

Principle of Materiality

Reading a Company’s Financial Statements an item is considerable “significant” if it influences or influences a reasonable individual decision.

Currency Unit Principles

In addition to this companies need to record only transactions that can be represented in stable currency units.

Confidence Principles

The credibility principles uses the guidelines in deciding which financial information to present in a company’s accounting.

Revenue Recognition Principles

A company records revenue as when they recognize or generate (rather than when they receive it).

Term Principles

Lastly, companies requires to report appropriate financial statements (income statement / balance sheet) for a particular term.

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