Basic Principles in Accounting

These are the basic principles of accounting:

Consistency Principle. The entity should use the same accounting method and functions from period to period. This principle is also known as "principle of regularity".

Objectivity Principle. Accounting records should be based on a reliable data so that the financial reports will project the real financial position of the entity. This principle is also known as "principle of sincerity".

Full Disclosure/Materiality. All information that would affect the user's understanding should be disclosed in the records.

Cost Principle. This principle states that assets should be recorded at their original cost rather than their fair market value.

Business Entity Principle. The business is a separate entity from its owners. Personal accounts of the owners should be separate from the accounts of the business entity.

Time Period Principle. Financial statements are prepared in a particular period of time. This allows users to obtain timely information useful in their decision making. This principle is also known as "principle of periodicity".

Stable Monetary Unit. Transactions should be recorded in a single currency and exchange rate. Inflation is ignored in the  accounting records.