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Accounting Principles

What is the accounting principle?

Accounting principles are set rules and guidelines published by the accounting authority GAAP (Generally Accepted Accounting Principles). Another set of accounting principles is called the international financial reporting standards (IFRS), which are adopted by 167 jurisdictions globally. In India, financial statements are prepared in accordance with the accounting principles issued by the Institute of Chartered Accountants of India (ICAI) and the laws laid down in the Companies Act 2013. The ICAI also issues guidance notes from time to time to help in the accounting process and provide clarity.

Purpose of Accounting Principle

The main purpose of accounting principles is to make sure that a company’s financial statements are accurate, consistent, and comparable.

This allows investors to easily analyze and extract useful information from the company’s financial statements, such as trends over time. It also enables the comparison of financial information across different companies. Accounting principles also help prevent accounting fraud by increasing transparency and allowing red flags to be detected.


Basic Accounting Principles

  • Accrual principle

  • Conservatism principle

  • Cost principle

  • Consistency principle

  • Going concern principle

  • Matching principle

  • Full disclosure principle

  • Materiality principle

  • Monetary unit principle

  • Economic entity principle

  • Revenue recognition principle

  • Time period principle

  • Reliability principle