These are the 10 principles set forth by the International Accounting Standards Board and require accountants to follow when preparing financial statements. FRIENDS THAT MISS OUT IS BECAUSE OF THE BOARD!
1. Underlying assumption: basic assumption of accounting.
Watching: What is Going Concern?
2. Going concern: continuing operationThe financial statements are normally prepared on the assumption that an entity is a going concern and will continue in operation for the foreseeable future (at least the next 12 months). Hence, it is assumed that the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operations.(Financial statements are usually prepared on the assumption that an enterprise will continue in business and will continue in business. in the near future (at least 12 months). At that time, the enterprise does not intend to dissolve or significantly reduce the scale of its operations).
3. Materiality concept: key principleInformation is material if omitting it or misstating it could influence decisions that users make on by Advertise”> the basis of
financial information about a specific reporting entity
4. Accruals basis: The effects of transactions and other events are recognized when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.
5. Matching concept: matching principleRevenue earned should be matched with the corresponding cost/expenditure caused to generate this income (The revenue earned must be matched with the corresponding cost that generates that revenue).
6. Prudence concept: principle of caution Prudence means to be cautious when exercising judgment. In particular, profits should not be recognized until realized, but a loss should be recognized as soon as it is foreseen. when it actually happens, but a loss is recognized as soon as it is expected).
7. Substance over form: the principle that the content of a transaction should be reflected in financial statements rather than simply its legal form Rather than formality is understood, the economic content of transactions will be reflected in the financial statements, not its form. may be mere recognition).
See also: What is Nat – Classification of Nat
8. Business entity concept: business entity principleFinancial statements always treat the business as a separate entity. For accounting purpose, the business unit is separate, distinct from its owners and exists in its own right owner and exists with its own rights).
9. Fair presentation: Financial statements are required to give a fair presentation or present fairly in all material respects the financial results of the entity. fair presentation in all material aspects of the business).
10. Consistency concept: principle of consistencyTo maintain consistency, the presentation and classification of items in the financial statements should stay the same from one period to the next, except as follows: there is a significant change in the nature of the operations or a change in presentation is required by an IFRS nature of the enterprise or changes as required by IFRS).
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See also: What is a decision – Meaning of the word Decision
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