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COST PRINCIPLE OF ACCOUNTING PROFESSIONAL

IFRS was introduced to bring uniformity to the financial environment so that the financial statements can be easily interpreted from company to company and country to country. These standards are also useful in determining how the transactions and other accounting events should be reported in the financial statements. IFRS standards are issued by the International Accounting Standards Board (IASB) which is used in more than 120 countries. International Financial Reporting Standards (IFRS) GAAP is based on ten principles which are given below:

These principles aim to bring clarity, consistency, and comparability to accounting information.

COST PRINCIPLE OF ACCOUNTING PROFESSIONAL

FASB has developed these principles over a period from usage, reason, common experiences, historical precedents, individual statements, professional bodies, and regulation of government agencies. These principles are accepted by accountants all over the world as general guidelines for preparing accounting statements. GAAP is a set of commonly accepted accounting principles, standards, and procedures that are formed by the Financial Accounting Standards Board (FASB). Generally Accepted Accounting Principles (GAAP) These principles also help in enhancing the utility to various users. These rules are usually known as GAAP and they bring uniformity and consistency to the accounting process. This can be possible only if the accounting information is based on some particular set of rules which are known as policies, principles, and conventions. The information is required to be comparable in order to compare the performance of the firm with other firms as well as with the previous year's performance of the firm. Also, these principles are variable.Īccounting principles are feasible as they can be applied without any cost or undue complexity.Īccounting information must be reliable and comparable so that a meaningful conclusion can be derived from it by internal and external users. On this basis, accounting principles are objective. These principles are relevant because they provide useful information to accounting users.Īny principle is called objective if there are not any personal biases or judgments of the person who is furnishing information. There are three criteria that decide the general acceptance of the accounting principles.Accounting principles are not static, meaning they can change over time to reflect changes in corporate practices, government legislation, and the demands of accounting information users.They are not tested in the laboratory unlike principles of science and hence are not universally applicable, i.e., their use can vary in a different business environments.

These principles are derived from experience and reasons.

These principles are the set of rules and guidelines which are prepared to bring uniformity and easy availability and understanding of the accounting information.

They also mitigate accounting fraud by increasing transparency and allowing red flags to be identified. The financial performance helps the creditors in deciding whether to give the loans to the company and helps the investors in deciding whether they should invest in the company or not. This makes things easier for the insiders as well outsiders who have an interest in the business. These principles aim to make the financial statements complete, consistent, and comparable. Next → ← prev Accounting Principles MeaningĪccounting principles refer to various rules and guidelines that a company is bound to follow while preparing and reporting financial data.