Accounting Principles
Accounting Principles
The general rules and concepts that govern the Accounting filed are referred to as the Principles of Accounting. The Financial Accounting Standards Board (FASB) using the groundwork of principles and guidelines has formulated these rules. They lay the foundation for sound and ethical accounting practices.
The GAAP (Generally accepted accounting principles or "GAAP") consists of three important sets of rules:
• The underlying accounting principles
• The rules and standards in more detail as issued by FASB and its predecessor the Accounting Principles Board (APB), and
• General industry practices.
A Public Limited company is required to follow Generally accepted accounting principles in the preparation of the financial statement (The Income statement, Balance Sheet and Cash Flow Statements ).
A few Accounting Principles have been briefly described below:
1. Economic Entity Assumption: This principle assumes that the business transactions are separate and distinct from the transactions of the owners.
2. The Historical Cost Principle: According to this principle assets are to be recorded at the value at which they have been purchased. The present market value has no bearing on the depreciation of the asset.
3. Full Disclosure Principle: According to this principle, disclose all information which is important to an investor or lender using the financial statements. If the disclosure is incomplete or only partial, the business would be deemed as not adhering to the Accounting principles.
4. Going Concern Principle: This accounting principle assumes that the company’s existence would be perpetual and it would continue to exist to carry out its objectives and commitments and will not liquidate in the foreseeable future. The going concern principle allows the company to pay some of its accrued expenses in future and defer some of its prepaid expenses until future accounting periods.
5. Matching Principle: This accounting
The general rules and concepts that govern the Accounting filed are referred to as the Principles of Accounting. The Financial Accounting Standards Board (FASB) using the groundwork of principles and guidelines has formulated these rules. They lay the foundation for sound and ethical accounting practices.
The GAAP (Generally accepted accounting principles or "GAAP") consists of three important sets of rules:
• The underlying accounting principles
• The rules and standards in more detail as issued by FASB and its predecessor the Accounting Principles Board (APB), and
• General industry practices.
A Public Limited company is required to follow Generally accepted accounting principles in the preparation of the financial statement (The Income statement, Balance Sheet and Cash Flow Statements ).
A few Accounting Principles have been briefly described below:
1. Economic Entity Assumption: This principle assumes that the business transactions are separate and distinct from the transactions of the owners.
2. The Historical Cost Principle: According to this principle assets are to be recorded at the value at which they have been purchased. The present market value has no bearing on the depreciation of the asset.
3. Full Disclosure Principle: According to this principle, disclose all information which is important to an investor or lender using the financial statements. If the disclosure is incomplete or only partial, the business would be deemed as not adhering to the Accounting principles.
4. Going Concern Principle: This accounting principle assumes that the company’s existence would be perpetual and it would continue to exist to carry out its objectives and commitments and will not liquidate in the foreseeable future. The going concern principle allows the company to pay some of its accrued expenses in future and defer some of its prepaid expenses until future accounting periods.
5. Matching Principle: This accounting