How Principles and Guidelines Affect Financial Statements?
The basic accounting principles and guidelines directly affect the way financial statements are prepared and interpreted. Let's look...
Conservatism
If a situation arises where there are two acceptable alternatives for reporting an item, conservatism directs the accountant to choose...
Materiality
Because of this basic accounting principle or guideline, an accountant might be allowed to violate another accounting principle if an...
Revenue Recognition Principle
Under the accrual basis of accounting (as opposed to the cash basis of accounting), revenues are recognized as soon as a product has been...
Matching Principle
This accounting principle requires companies to use the accrual basis of accounting. The matching principle requires that expenses be...
Going Concern Principle
This accounting principle assumes that a company will continue to exist long enough to carry out its objectives and commitments and will...
Full Disclosure Principle
If certain information is important to an investor or lender using the financial statements, that information should be disclosed within...
Cost Principle
From an accountant's point of view, the term "cost" refers to the amount spent (cash or the cash equivalent) when an item was originally...
Time Period Assumption
This accounting principle assumes that it is possible to report the complex and ongoing activities of a business in relatively short,...
Monetary Unit Assumption
Economic activity is measured in U.S. dollars, and only transactions that can be expressed in U.S. dollars are recorded. Because of this...
