Demonstrates how decision makers use accounting information for reporting purposes. Accounting Concepts and Principles with Examples 1. The matching principle requires that businesses use the accrual basis of accounting and match business income to business expenses in a given time period. For example, the commissions for sales should be recorded in the same accounting period that sales income was made (and not when they were paid). Examples of some other accounting principles include: Conservatism: recording revenues, assets, expenses and liabilities only when the company is reasonably certain they will occur. For example, if you have a business and the business owns a building, that building, according to the cost principle, shows up on your balance sheet at its historical cost; you don’t adjust the values in an accounting system for changes in a fair market value. ACCOUNTING CONCEPTS AND PRINCIPLES1 Prepared By: Rahul A. Paneliya 2. External stakeholders (for example investors, banks, agencies etc.) Introduces accounting principles with respect to financial reporting. Accounting principles ensure that companies follow certain standards of recording how economic events should be recognised, recorded, and presented. Focuses on the preparation of accounting information and its use in the operation of organizations, as well as methods of analysis and interpretation of accounting information.
2020 principle of accounting with example