The principles should be easy to use otherwise their utility will limit.

The accounting principles should be practicable. Because the value will base on market prices and personal judgment will differ in finding out value. The cost principle will be more useful than the value principle. It will not be an objective principle and its usefulness will limit. If a principle can influence the personal bias and whims of users. There should not be a scope for personal bias. Objectivity means reliability which also means that the accuracy of the information reported can verify.Ī principle will say to be objective if it bases on facts and figures. Accounting principle says to be objective when it solidly supports by facts. That the information is not influencing by the personal bias or Judgement of those who furnished it. In other words, an accounting rule, which does not increase the utility of the records to its readers, is not acceptable as an accounting principle. The general acceptance of an accounting principle usually depends on how well it meets the following three basic norms:Ī principle is useful to the extent that it results in meaningful or relevant information to those who need to know about a certain business. It is acceptable because they are believing to be useful. Thus, we may define Accounting Principles as those rules of action or conduct which are adopting by the accountants universally while recording accounting transactions. Thus, generally accepted principles and standards provide a common financial language to enable informed users to read and interpret financial statements.

These principles represent the most current consensus about how accounting information should record, what information should disclose, how it should disclose, and which financial statement should prepare. This process should carry out in conformity with generally accepted accounting principles. It discusses the generally accepted accounting principles as follows: Financial statements are the product of a process in which a large volume of data about aspects of the economic activities of an enterprise are accumulating, analyze and report. The American Institute of Certified Public Accountants (AICPA) has advocated the use of the word” Principle” in the sense in which it means “rule of action”. They are serving as an explanation of current practices and as a guide for the selection of conventions or procedures where alternatives exist. It is a body of doctrines commonly associated with the theory and procedures of accounting. They may define as those rules of action or conduct which are adopting by the accountants universally while recording accounting transactions. These standards are termed “Accounting Principles”. In order to make this language easily understandable all over the world, it is necessary to frame or make certain uniform standards which are accepting universally. Accounting is the language of business through which economic information is communicating to all the parties concerned.

Accounting principles definition