1. Basic Accounting Principles The Cost Principle<br />Businesses need to register and report all their assets depending on the actual cost received to the businesses, while gaining those assets rather than the free-market rate of the assets themselves. <br />Cost principle is a reliable method to record and report data. Also, it decreases the chance for elements like predetermined market values to step in with the accounting. <br />The Accrual Principle<br />Businesses need to register and report revenue when it's earned or made and realized definitely not once the cash for the revenue is received.<br />The accrual principle basically shows the work finished by the company/business and not the work that needs to be done for the future.<br />The Matching Principle<br />Businesses get to analyze current expenses and revenues. <br />The matching principle shows the market, how well companies/businesses are doing financially and effective they really are. <br />The Disclosure Principle<br />Businesses have to disclose their records, so that judgment over their financial status can be made accordingly. <br />But revealing the accounting and financial data of the companies/businesses should not make them decrease unjustified expenses or make incorrect notions.<br />Basic Accounting ConceptsBusiness Entity<br />This principal treats the company as a separate entity from its owners. Personal accounts of owners/partners should be kept separate from profits and expenses of the company.<br />Going Concern<br />The assumption here is made that a business will keep on trading or operating for a very long time.<br />Going concern concept indicates that the financial statements don't necessarily represent that business's worth, if the assets were liquidated. However, those assets can be used for any future financial operations.<br />Consistency<br />For all businesses, the principles used should be same for each and every set of accounts which are prepared. <br />This means, if depreciation is recorded, it should always be set at the same percentage every time.<br />Prudence<br />Businesses should try to make mistakes on the side of caution, while making estimates and valuations. <br />Cost<br />This principle states that the company has to consider the original cost of fixed assets like building and machinery, rather than market value. <br />Stable Money<br />Any transactions occurring over a certain time frame should always reflect single currency and exchange rate. This way, a year's accounts can be compared with another, despite the rate of inflation.<br />Duality<br />Every transaction has 2 effects. Let's say the business purchases a new asset, printing machine. This will show an increase in fixed assets and also an increase in liabilities or cash.<br />
