The Principles of Accounting are foundational concepts that guide the preparation and presentation of financial statements. They ensure consistency, reliability, and comparability in financial reporting. Here are the main accounting principles:
🔹 1. Accrual Principle
- Revenue and expenses are recorded when they are incurred, not when cash is received or paid.
🔹 2. Consistency Principle
- The same accounting methods and procedures should be applied consistently from period to period.
🔹 3. Going Concern Principle
- It is assumed that a business will continue to operate in the foreseeable future and not liquidate.
🔹 4. Matching Principle
- Expenses should be matched with revenues in the period in which they are incurred to generate those revenues.
🔹 5. Cost Principle
- Assets should be recorded at their original purchase cost, not market value.
🔹 6. Revenue Recognition Principle
- Revenue is recognized when it is earned and realizable, regardless of when cash is received.
🔹 7. Full Disclosure Principle
- All relevant and necessary information should be fully disclosed in financial statements.
🔹 8. Objectivity Principle
- Financial records must be based on verifiable and objective evidence, not personal opinions.
🔹 9. Materiality Principle
- Only items that are material (significant) enough to affect decisions should be recorded.
🔹 10. Conservatism Principle
- In case of uncertainty, record expenses and liabilities earlier, and recognize revenues and assets only when they are assured.