[ad#google120x240]Accounting principles make the core framework for making and constructing financial statements.These are the rules of operations, basic assumptions and essential characteristics that lay the foundation for financial statements.
Some people believed that since in the past there was no definite “set” of accounting principles given in one form, they felt that these principles are incomplete or vague. But in reality, accounting principles’ definitions can be presented in various formats which may therefore lead to confusion for some people especially those beginners. However the case maybe, accounting principles are an absolute must in preparing financial statements. They are like adhesives that hold the accounting process together.
Some accounting principles are pegged on the objectives set forth by the very purpose why financial statements are made. Example, a financial statement has an overall objective to provide its user a sturdy gauge for making huge business decisions. Therefore, it should be included as part of the accounting principles that the information used in making the financial statement should be dependable and practical. And to be dependable, the accounting information should be impartial, correct, and provable. Also, practical accounting principle simply means, accounting information must be conventional, prepared in a timely fashion, and should be able to elicit relevant and meaningful feedback.
Other accounting principles’ additional distinctiveness are consistency that the accounting information must be comparable, reliable and must serve as a utilitarian need (such as cost/benefit), and should make a material difference.
Some basic operational rules for accounting are also established especially with regards to the time of revenue and expenses reports, ways in which the expenses are matched with revenue, the decision to be made that may overstate or understate figures and the kind of information that should be disclosed so that the end user will fully grasp the circumstances where the accounting information is being shown.
Under accounting principles and standards, some basic assumptions can also be relied upon by the end user such as the information related to the business entity being accounted, the fact that accounting gives a certain company a sense of continued survival, the accounting information that reveals the financial stance of the company in a given time intervals, the company’s historical cost (amount received, paid and incurred), and the sturdy method that the accounting process is currently using. These basic accounting information would then serve as a great take off point for accounting experts to come up with a solid picture of the company’s current financial stance.
These are just few of the literally thousands of accounting standards and principles that have been used through the years. These are constantly revised and discarded as the need arises for at times, they become outdated. And being able to master the game of corporate financial record keeping and accounting means being updated and abreast with these changes and modifications every so now and then.
