Basic principles of accounting

To understand accounting we have to understand its basic principles. They guide us about how we can analyze, verify, record, and report the financial position of the business.

These basic principles are used in every step of the accounting process. Nowadays many people are not aware of the basics so you can take online accounting homework help if you are finding any difficulty in understanding them. Now let us discuss the basics

There are total 5 principles in accounting which are explained below

  • Revenue recognition principle
  • Historical cost principle
  • Matching principle
  • Full disclosure principle
  • Objectivity principle

 

The first one is revenue recognition in which the revenue is recognized in the income statement of an enterprise. Revenue is the inflow of cash receivables that comes from the sale of goods from ordinary activities.

 

The second one is a historical cost in which the asset is recorded on the price in which it is purchased and that cost becomes the basis of accounts during the period of acquisition. The accounting homework solutions can help you in making your assignments.

 

The matching principle shows that the expenses that are incurred should match the revenue of that time. If the revenue of all the sold goods is recognized then the cost of goods sold has also to be charged.

 

The full disclosure principle says that financial statements should be used to convey information. The financial statements are made in such a way that they disclose all the reliable information. The next one is the objectivity principle which explains that the accounting data be accurate and free from any personal bias.


Neil Williams

2 Blog posts

Comments