BASIC ACCOUNTING PRINCIPLES
COST PRINCIPLE All assets acquired should be valued and recorded based on the actual cash equivalent or original cost of acquisition, not the prevailing market value or future value.
FULL DISCLOSURE PRINCIPLE In the preparation of financial statements, the accountant should include sufficient information to permit the stakeholders to make an informed judgement about the financial condition of the enterprise.
MATCHING PRINCIPLE This principle requires that expenses be matched with revenues. It means that in a given accounting period, the revenue recorded should have an equivalent expense recorded, in order to show true profit of the business.
REVENUE RECOGNITION PRINCIPLE Revenues are recognized as soon as goods have been sold or a service has been rendered, regardless of when the money is actually received.
MATERIALITY PRINCIPLE Business transaction that may affect the decision of a user of financial information are considered important or material and thus must be reported properly.
CONSERVATISM PRINCIPLE this principle state that given two options in the valuation of business transactions, the amount recorded should be the lower rather than higher value.
OBJECTIVITY PRINCIPLE This principle requires business transactions to have some form of impartial supporting evidence or documentation.
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ABM (BASIC ACCOUNTING)
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