KSN Professional Accountants

5 Accounting Principles

Accounting principles refer to rules that organizations follow to disclose their financial information. These principles ensure that certain practices are performed in accordance with best practices, state and federal law. Depending on the size of your company, they can serve as a reference for stakeholders or governing bodies.

Now that you have a good understanding of what these accounting terms are, below we will go into more detail about each of these principles.

Principle of Revenue Recognition

This is the period when revenue is recorded in your company's income statement. In order for your revenue to be recognized in this time frame, if you pay accruals, the revenue must be recognized in the period in which you received the money.
Cost principle

Recording your assets when purchasing a product or service will help you organize your business expenses. It is vital to record the purchase price of anything you spend money on, and recognize the depreciation of those assets accordingly.
The principle of coupling

Expenses are to be reconciled with the revenue recognized in the same accounting period and in the period in which the expenditure is incurred. If there is a period in which revenue is recognized for products or services sold, the cost of those items should also be recognized.
The principle of full transparency

The information contained in the financial statements must be updated, this ensures that important partners/customers are informed about relevant company information.
The principle of objectivity

Accounting data must always remain correct and free from personal opinions. Ensure the details are also backed up with evidence, which can include coupons, receipts, and bills.

Closing remarks

The basic accounting principles provide a focused approach to the presentation of financial records. By establishing these rules early on in your business, you can ensure a more structured and productive monetary experience.