Basic principles and concepts that underpin accounting practices.
double-entry bookkeeping – an accounting system where every transaction affects at least two accounts, maintaining the accounting equation.
accounting equation – assets = liabilities + equity; the fundamental equation of accounting.
matching principle – the concept that expenses should be recorded during the period they are incurred to generate revenues.
historical cost principle – assets should be recorded at their original purchase price.
revenue recognition principle – revenue is recognized when it is earned, not necessarily when cash is received.
materiality – all data that are likely to influence the decision-making of investors must be recorded in financial statements.
conservatism principle – when in doubt, expenses and liabilities should be recorded immediately; revenues only when they are assured.
...
This is not all! Sign up to see the rest of this text and become part of our community of language learners.
...
full disclosure principle – all information that affects the full understanding of a company's financial statements must be included with the statements.
monetary unit assumption – assumption that economic activity is measured in a stable currency.
Jakub Marian