Do you want to learn about the basic accounting principles? It’s important to have an understanding of the principle of accounting when you undertake accounting as a major subject. Accounting principles are the building block of GAAP. Some of the accounting principles come from the accounting practices, on the other hand, others come from the ruling making bodies like FASB. These are the rules that companies follow while reporting financial information. These principles help students in solving different accounting problems. Also, the explanation of these principles assists students in understanding the accounting concepts and accounting terminologies.
Once you grasp these principles you will comfortably solve the accounting problems, quizzes, quick tests, and accounting assignments. Undoubtedly, accounting is a difficult subject because it has many concepts and rules. Students find it quite challenging to learn and understand the basic principle of accounting. If you are struggling with the pressure of pending accounting assignments, you can seek accounting assignment help online from the pool of professional writers. In this blog, I will be sharing the basic principles of accounting and why they are important.
What are the Basic Accounting Principles?
Before we explain the basic principles of accounting, let’s discuss what are the basic accounting principles. Accounting principles are the general rules and guidelines that companies follow while reporting financial data to all accounts. The field of accounting is governed by series of rules and principles defined by the Financial Accounting Standard Board. These rules are often referred to as generally accepted accounting principles (GAAP). GAAP covered basic accounting principles, guidelines, rules, and standards issued by FASB and generally accepted industry practices. In this blog, we will be discussing the basic accounting principles and guidelines and why they are significant.
Why Are Accounting Principles Significant?
The purpose of using the principle of accounting is to be able to communicate economic information in a language that is understandable and acceptable from one business to another. Companies use this information in the preparation of financial statements. It depends on an entity’s characteristics which principle they are required to apply. If you have undertaken accounting as a major subject, you must be getting accounting assignments from your professors.
If you want to learn accounting as a subject, you need to learn the basic accounting principles. These principles have huge significance in the field of accounting. You will find these rules all over the place in the study of accounting. After you learn the basic principles of accounting, you will get ease in understanding different accounting topics. Moreover, you can refer to these principles later in any accounting studies, accounting assignment, and accounting coursework.
List of the Accounting Principles
Here is the list of the basic accounting principles. I will be discussing each in this blog and how they are related to financial accounting.
- Historical Cost Principle
- Full Disclosure Principle
- Revenue Recognition Principle
- Accrual Principle
- Matching Principle
- Consistency Principle
- Cost-Benefit Principle
- Conservatism Principle
- Objectivity Principle
- Economic Entity Principle
Historical Cost Principle
This principle requires companies to purchase the goods, services, and assets at the price they purchase for them. Assets are being on the balance sheet at their historical cost without being adjusted for fluctuation in the market value. That means if you have purchased any asset, you should record it in the books of the account’s historical cost, not on the resell cost.
Full Disclosure Principle
This rule states that any knowledge that would materially affect a financial statement user’s decision must be disclosed in the footnotes of the financial statement. The purpose is to prevent the company from hiding material facts about accounting practices or known contingencies in the future. This accounting standard specifies the enormous number of informational disclosures.
One of the Crucial Accounting Principles; Revenue Recognition Principle
This principle states that revenues should be recorded at the point of sale. That means revenues occur at the time when the buyer takes legal possession of the item sold. Not at the time when the seller accepts the cash for the transaction. The accrual basis of accounting gives more accurate information of the financial events during the period.
Accrual Principle
The accrual principle is a basic requirement for all accounting frameworks such as; GAAP and IFRS. This concept states that accounting transactions should be recorded in a period when they occur, rather than when cash flows of the transactions are received.
Matching Principle
This principle states that revenues should be reported when the cash is received and expenses should be reported when the cash is spent. However, this principle states that businesses should use an accrual accounting system and report all the information using that system. According to this principle, expenses should be matched with the revenues and sales, and expenses used to produce those sales should be reported in the same accounting period.
Consistency Principle
According to the consistency principle, all accounting principles and assumptions should be applied consistently from one period to another. In other words, this rule states that after adopting a principle, continue to flow it consistently in future accounting periods so the result would be comparable from time to time.
Cost-Benefit Principle
It is an accounting rule that states that the benefits of an accounting system should always outweigh its associated cost. In other words, the cost of providing information through financial statements should not exceed its utility to readers. That means the cost of providing the information in the financial statements should not exceed the benefits that users get while reading those statements. Therefore, companies can’t include every bit of information about themselves as there is a financial cost of doing this.
One of the Focal Accounting Principles; Conservatism Principle
This principle states that the accountant should always error on the more conservative side in any situation. This concept focuses on the recognition of the expenses and liabilities as soon as possible when there is uncertainty about the outcomes. But, this concept focuses on recognizing the revenues and assets when they are being received.
Objectivity Principle
The objectivity principle states that all accounting records, financial statements, and financial information should be independent and free of biases. The objective of the Financial Statements of the company is to convey the financial position of the company. This principle intends to keep the financial statements free of biases.
Economic Entity Principle
The concept behind this principle is to keep the business transaction free from owners and other businesses. Also, this principle focuses on separating the transaction of a sole proprietor from the sole proprietor’s business. It also means that financial statements can be prepared for a group of separate corporations and controlled by one corporation. The group of the commonly known corporation is known as an economic entity.
Difficulties Faced by Students in Accounting Assignment
Indeed, accounting is a vast subject and includes several different concepts and principles of accounting. Students find it challenging to compose accounting assignments. They find the subject boring at times and lose interest in it. Students face many problems while writing accounting assignments. Here are the few problems that students face in accounting assignment writing.
Lack of Time: Time is the biggest constraint that comes their way. It is a primary reason why students cannot perform well in accounting assignments. Also, during academic life, students stay busy with other assignments such as notes, studying for tests and attending classes, etc. So, they don’t get time to prepare their assignments on time.
The complexity of the topics: Accounting is a vast academic discipline with a complex topic that seems confusing to students. Accounting assignment writing requires a clear and comprehensive understanding of accounting principles and concepts. The majority of the students can’t differentiate between similar topics. Thus, it leads them to poor scores in exams.
Inadequate knowledge of a subject matter: If you want to get A+ grades in your academic life, you need to focus on your studies. Students who have undertaken accounting as a major subject should have sound knowledge about the fundamental concepts of accounting. If you have vague concepts, this can ruin your knowledge and the quality of your assignment.
Seek Accounting Principles Assignment Help from Professionals
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Summary
Accounting is a broad subject that has many concepts, terminologies, principles, and rules. Earlier in this blog, I have discussed accounting principles and rules. These accounting rules help students in solving their accounting assignments. Know about the basic rules of accounting and craft a compelling paper. During your academic life, professors assign students with many assignments. However, it becomes tedious for students to complete their assignments because of many reasons. If you are not capable of writing yourself, you can seek accounting assignment help online from professional writers.