The Institute of Chartered Accountants and Provisions of Company Act, along with the guidelines under the Act govern the accounting principles and practices, followed in India. The knowledge of the more important principles involved is an asset for the financial analyst. The majority of the companies follow these right principles of accounting, which are prudent and conservative. Some of these [...]
The following points highlight the four main considerations which guide the selection of accounting principles. The considerations are: 1. Accurate Presentation 2. Conservatism 3. Profit Maximization 4. Income Smoothing. Consideration # 1. Accurate Presentation: One of the criteria for assessing the usefulness of accounting information is accuracy in presentation of the underlying events and transactions. This criterion may be used [...]
The following points highlight the eight important principles of accounting. The principles are: 1. Cost Principle 2. Dual-Aspect Principle 3. Accrual Principle 4. Conservatism Principle 5. Matching Principle 6. Consistency Principle 7. Materiality Principle 8. Full-Disclosure Principle. Accounting Principle # 1. Cost Principle: The cost principle requires that assets be recorded at their exchange price, i.e., acquisition cost, or historical [...]