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 would be irrelevant and unreliable.

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

These principles are the building blocks that form the basis of more complex and specialized principles called GAAP or generally accepted accounting principles such as the International Financial Reporting Standards, US GAAP, etc. They deal with matters like accounting for revenue, accounting for income taxes, accounting for business combinations, etc.

Written by Obaidullah Jan