As a business owner, it is your responsibility to keep accurate records of your company's financial status.
For an accurate depiction of a company's financial situation, these principles are applied at each stage of the accounting process.
There are five basic accounting principles:
- The principle of revenue recognition
- Cost Principle, based on historical data
- The principle of matching,
- Principle of Full Disclosure, and
- Principle of objectivity.
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Revenue Recognition Principle
An organization's income statement is primarily concerned with the recognition of revenue under the Revenue Recognition Principle.
Suppose you want to know how much an organization makes. In that case, you may look at how much money they bring in by selling their products and services, providing their services, and having others utilize their company's resources, all of which result in interest royalties and dividends. Many students need accounting assignment help online to decline the pressure of the academic task by hiring an expert.
Historical Cost Principle
The historic cost principle states that an asset's cost at the time it was acquired and future accounting periods would be used as its purchase price when recording its value in financial records. Many international scholars avail of accounting assignment help in Australia, Canada, India, and the UK to indulge themselves in other activities and hobbies to score decent marks.
Matching Principle
This principle states that costs should be charged to an accounting period at the same time as revenues are recorded for that period. For example, if revenue is recorded on all items sold throughout a period, the price of those sold should likewise be allocated to that period.
You should only charge expenditures on sales that have been received in cash to that point in time, not record income on all sales.
Rather than focusing on the time and quantity of real cash inflows and outflows, this approach focuses instead on the occurrence of income and costs.
Full Disclosure Principle
The financial statements should, following this idea, serve to transmit information rather than to hide it.
That thing they claim to represent must be presented in a manner that is clear and understandable by those who utilize it.
There must be a proper accounting and presentation of the information, not only the legal form it is delivered.
Objectivity Principle
An accountant's personal bias should not influence his or her ability to objectively present the facts of a company's financial situation.
For example, according to the Objectivity Principle, all transactions and events in the books of accounts must be supported by sufficient proof.
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