Basic Accounting Principle

There are a number of basic accounting principle that contains norms and rules according to which accounting is conducted within a business. A few of these principles can be explained as under:-

Accrual Principle

This principle states that the accounting transactions should be recorded in the period in which they actually occur instead of recording in the period in which the cash flow is associated with them

Conservatism Principle

This principle states that liabilities and expenses should be recorded as soon as possible but revenues and assets must be recorded until you are sure that they are going to be occur

Consistency Principle

This means when you select an accounting principle you must go on using the principle until or unless a new and better principal comes at the place of the previous principle

Cost Principle

This principle states that a business should record its assets, liabilities, equities and investments at their original price.

Economic Entity Principle

This principle states that the transactions and expenses of the owner must be kept separate from the business transactions and expenses.

Full Disclosure Principle

This principle states that along with the financial statements you should append or add a full disclosure regarding the policies of the company