Accounting principles

Purpose of this section “accounting principles” is to explain the fundamental principles of accounting which are accepted as general rules and guidelines by almost all the accounting standard setting bodies of the world. These fundamental principles are the foundation of all accounting frameworks. Based on these accounting principles, more detailed and complex rules and guidelines are prepared known as accounting standards. For instance, International Accounting Standards Board (IASB) issues International Financial Reporting Standards (IFRS) which is accepted as the reporting framework in many countries. In US, Financial Accounting Standards Board (FASB) has developed Generally Accepted Accounting Principles (US GAAP) which is the applicable accounting framework in the US. Similarly, some other countries have developed their own accounting and reporting standards. All these different accounting standards have one thing in common, these accounting standards usually do not contradict the fundamental principles of accounting and rather, these accounting standards are based on these fundamental accounting principles.

Following chapters are included in this section which is dedicated to the fundamental accounting principles.

  1. Characteristics of financial information
  2. Economic entity concept
  3. Monetary unit assumption
  4. Time period principle
  5. Full disclosure principle
  6. Going concern assumption
  7. Accrual concept
  8. Historical cost principle
  9. Prudence concept
  10. Substance over form
  11. Revenue recognition principle
  12. Matching principle
  13. Materiality
  14. Understandability
  15. Consistency
  16. Comparability