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ABS-Carolinas LLC blog

Accounting Principles

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Accounting follows a certain framework of core principles called accounting principles, which makes the information generated through an accounting system valuable. Without these core principles accounting would be irrelevant and unreliable. These principals include:

  1. Accrual Concept
  2. Going Concern Concept
  3. Business Entity Concept
  4. Monetary Unit Assumption
  5. Time Period Principle
  6. Revenue Recognition Principle
  7. Full Disclosure Principle
  8. Historical Cost Concept
  9. Matching Principle
  10. Relevance and Reliability
  11. Materiality Concept
  12. Substance Over Form
  13. Prudence Concept
  14. Understandably Concept
  15. Comparability Principle
  16. Consistency Concept

These principles are the building blocks that form the basis of more complex and specialized principles called GAAP or generally accepted accounting principles. They deal with matters like accounting for revenue, accounting for income taxes, accounting for business combinations, etc.
This is why business owners need professional guidance to set up their accounting software and systems.
The end result of processing the day to day financial activity in a business is the preparation of accurate financial statements. The development of a professional chart of accounts is a first step in assuring that financial statements are of value to users which often include lenders, banks, investors, stockholders, insurance companies and tax prepares.Get some professional advice for this first critical step and build sound and solid financial reporting.
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