| Accounting principles are the basic
| |
| | to do when a choice can be made that
|
| assumptions, rules of operation, and
| |
| | might overstate or understate figures;
|
| essential characteristics that make up
| |
| | and, what information should be disclosed
|
| the framework for the construction of
| |
| | so that the reader will fully understand
|
| accounting financial statements.
| |
| | the circumstances under which the
|
| Long ago, I was perplexed to discover
| |
| | information is being presented.
|
| that there was no "set" of accounting
| |
| | There are also basic assumptions that the
|
| principles that was presented in one form
| |
| | reader can count on, such as: the
|
| such as you might find in the Bill of
| |
| | information is related to the business
|
| Rights. This is not to say that the
| |
| | entity only and doesn't have any
|
| principles are incomplete or vague, it
| |
| | unrelated information mixed in; the
|
| only means that the definitions of
| |
| | business is a going concern and won't
|
| accounting principles can be presented in
| |
| | cease operations soon; the financial
|
| various formats, which may lead to
| |
| | information presented is measured in
|
| confusion for some people, especially
| |
| | specific time intervals such as a month,
|
| beginners.
| |
| | quarter or year; the financial
|
| Be that as it may, accounting principles
| |
| | information is using a certain unit of
|
| are absolutely necessary when preparing
| |
| | measure such as dollars, not board feet,
|
| financial statements, just as the rules
| |
| | etc.; the information is presented at
|
| of a particular card game make the card
| |
| | historical cost, i.e., when received,
|
| game possible in the first place.
| |
| | paid, or incurred; and, the method of
|
| Accounting principles are like the glue
| |
| | accounting being used is double-entry and
|
| that holds the accounting process
| |
| | not some other method.
|
| together. For example, financial
| |
| | These are accounting principles as
|
| statements have an overall objective,
| |
| | opposed to accounting standards. An
|
| which is to provide the user of the
| |
| | accounting standard is an agreement as to
|
| statements a useful tool for making
| |
| | how an accounting issue will be treated.
|
| business decisions.
| |
| | For instance, a standard might state what
|
| In order to be useful, the accounting
| |
| | type of inventory system is appropriate
|
| information must have certain
| |
| | to use for a certain type of business;
|
| characteristics, such as being dependable
| |
| | how capital leases should be recorded;
|
| and practical. To be dependable, the
| |
| | how many years intangible assets should
|
| accounting information must be unbiased,
| |
| | be amortized; what methods of
|
| accurate, and verifiable. To be
| |
| | depreciation should be used, and so on.
|
| practical, accounting information must be
| |
| | There are literally thousands of
|
| predictable, prepared in a timely
| |
| | accounting standards that have been
|
| fashion, and be able to provide
| |
| | issued over the years. These standards
|
| meaningful feedback. Additional
| |
| | are constantly being revised or discarded
|
| characteristics are that the accounting
| |
| | as they become outdated.
|
| information must be consistent,
| |
| | If you want to play the accounting "game
|
| comparable, serve a utilitarian need
| |
| | of cards", you must become familiar with
|
| (such as cost/benefit), and make a
| |
| | the "rules of the game", which are
|
| material difference.
| |
| | accounting principles and standards. If
|
| Besides characteristics, certain
| |
| | you choose to not play by the rules, you
|
| operational rules are established as to
| |
| | do so at your own peril, as we have seen
|
| when revenue and expenses are reported;
| |
| | recently in the U.S. corporate accounting
|
| how expenses are matched to revenue; what
| |
| | scandals.
|
