The basic principles which every accountant has to take into consideration-for
(1) The Matching Principle : According to this principle, cost of the period should be charged from the revenue of same year only. Cost of one period or year cannot be charged from the revenue of any other period or year. Revenue for the period must be ascertained first and then the cost should be charged to it. The matching of costs with revenue is based on the actual system of accounting.
(2) The Complete Disclosure Principle : According to this principle, all the significant information relating to the economic affairs of the firm required by users of financial statements should be disclosed. It should be disclosed completely, so that the users can understand the statements properly. Apart from financial statements, it can be in form of annexure or foot notes etc.
(3) The Dual Aspect Principle : According to this principle of accounting, every business transaction has a double (dual) effect on the business and this double effect is recognized by recording both the aspects of every transaction. Every debit will have an equal credit. If one account is debited, some other account or accounts will be credited with the same amount. This is only known as double entry system. It is due to this principle that both the sides of balance sheet are equal and accounting equation is always true, i.e., Equity/Capital = Assets – Liabilities
(4) The Revenue Principle : According to this principle, revenue means amount which as been already received or is receivable for the accounting period. Revenue is treated as realized whenever the title of goods and services is transferred, it is immaterial whether the cash is received or not.
(5) The Expense Principle : According to this principle, every cost which is incurred for earning revenue, is termed as expense. For example, selling expenses, manufacturing expenses, administrative expenses etc
