[Biz] Accounting principle

1. conservatism principle

The conservatism principle is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received.

 

2. cost principle

The cost principle requires that assets be recorded at the cash amount (or the equivalent) at the time that an asset is acquired. Further, the amount recorded will not be increased for inflation or improvements in market value.

 

3. matching principle

The matching principle directs a company to report an expense on its income statement in the period in which the related revenues are earned. Further, it results in a liability to appear on the balance sheet for the end of the accounting period. The matching principle is associated with the accrual basis of accounting and adjusting entries.

 

4. revenue recognition principle

The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as opposed to the cash basis of accounting).

 

5. going cercern assumption

An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that the company will not liquidate in the near future. This assumption also provides some justification for accountants to follow the cost principle.

 

What is the cost principle? | AccountingCoach