Accounting Principles
Matching Principle
Matching Principle
A GAAP that states that the Expenses of one Fiscal Period should only be compared with the Revenue of the same fiscal period
Example
We cannot use revenue from July & August to make the Net income or loss look better for August. We can only use August’s revenue
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Principle of Conservatism
Principle of Conservatism
An accounting principle that states that accountants must be fair and reasonable when making estimates, and preparing financial statements. They must provide the worst case scenario to protect investors.
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Cost Principle
Cost Principle
An accounting principle that states the Assets of a business must be recorded according by acquisition cost, not market value (TLDR, what you paid for, not what the market says).
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Time-Period Principle
Time-Period Principle
AKA (Principle of Consistency) is a GAAP that states that states that a company should set and consistently use the same Fiscal Period
But why?
It allows them to compare Financial Statements for similar periods of time
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Business Entity Principle
Business Entity Principle
An accounting principle that states that a business is an entity unto itself and that the financial data of the business should be kept separate from that of the owner.
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Continuing Concern Principle
Continuing Concern Principle
An accounting principle that states that an Accountant must always assume that a business is going to continue to operate into the future unless it is known it is not.
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Revenue Recognition Principle
Revenue Recognition Principle
A GAAP that states that Revenue should be recorded when the service is performed, sale is made, or the bill is sent. NOT when the cash is received This follows the Accrual Basis of Accounting
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Double-Entry Accounting Principle
Double-Entry Accounting Principle
An accounting principle that states for every debit there must be an equal credit.
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Concept of Objectivity
Concept of Objectivity
An accounting principle that states that Source Documents must be prepared for each Transaction so as to provide objective tangible proof that a Transaction did in fact occur.
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Principle of Materiality
Principle of Materiality
An accounting principle that states an accountant must disclose all information that will affect the decisions of the users of the financial information and he or she can disregard information that will not affect their decisions.
Ex. No one will care about a stapler, it wont affect decisions
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