Basic Accounting Principles

...

1.1.5 Full disclosure principle:

Is involving all the necessary information that the investor or lender using the financial statement may need or that may impact their understanding of it. This should be included within the financial statement or in the notes to the statement

1.1.6 Going concern principle:

This is the assumption that a company will exist long enough to achieve its objectives and obligations, and will not go bankrupt in the foreseeable future. If the accountant sees that the company will not be able to go on, s/he is required to disclose this assessment.

1.1.7 Matching principle:

When recording the revenue of a product, also record the expenses related for that revenue at the same time.

1.1.8 Revenue recognition principle:

Revenues are documented as soon as the product has been sold or service has been performed, even if the customer hasn’t paid yet (accrued revenues).

1.1.9 Materiality principle:

Is recording every transaction in the accounting records, if not, it may affect or change the decision making process for the reader of the financial statement.

1.1.10 conservatism principle:

The concept where the expenses and liabilities are recorded straight away, whereas the the assets and revenues are only recorded when it is sure of their occurrence

1.3 conclusion

Each principle is important for accounting, since it shows the accountant the right way of doing things. These principles need to be known by every accountant, any mistake from an accountant no matter how simple it is, will affect the financial statement and whoever deals with it.

They are put for a reason and need to be followed and understood, to understand how accounting is operated. When understanding these principles it is also effective to know the reason behind them, never hesitating to ask why, because this will only make you better at what you do.

1.4 References:

http://www.dummies.com/how-to/content/understanding-the-basic-principles-of-accounting.html

http://www.accountingcoach.com/accounting-principles/explanation

http://www.accountingtools.com/basic-accounting-principles