Accounting Principles

Definition-Accounting principles are basic guidelines that provide standards for scientific accounting practices and procedures. They guide as to how the transactions are to be recorded and reported. They assure uniformity and understandability.Accounting principles are Generally Accepted Accounting Principles (GAAP), which guide all accounting users when interpreting accounting data or information.

Accounting principles are used by accountants to prepare internationally acceptable final accounts and financial statements 
Accounting principles works hand in hand with accounting concepts and conventions such that it provides the foundation of recording transactions in an acceptable manner

Examples of Accounting Principles

  1. Realization Principle-this perception advocates recording of only those business dealings which are actually realized. For example Sale or Profit on sales will be taken into account only when money is realized i.e. either cash is received or legal ownership is transferred or both.
  2. Matching Principle-It is referred to as matching of expenses against incomes. It means that all incomes and expenses relating to the financial period to which the accounts relate should be taken in to account without regard to the date of receipts or payment.
  3. Full Disclosure Principle-this principle guides on matters of information significance. It advocates that all significant information must be disclosed for the sake of the users of accounting data.
  4. Duality Principle-every business transaction has double effect-ie double entry principle. According to this principle, every transaction has two aspects i.e. the benefit receiving aspect and benefit giving aspect.
  5. Verifiable Objective Evidence Principle-under this principle, accounting data must be verified.
  6. Historical Cost Principle-business transactions are always recorded at the actual cost at which they are actually carry out. This principle advocates that any time an asset is acquired, it should be recorded at its actual cost and the same is used as the basis for all subsequent accounting purposes such as charging depreciation on the use of asset.
  7. Balance Sheet Equation Principle-under this principle, all asset value are equal to the sum of capital and liabilities of the organization. In other words debit entries=credit entries.