What are the Accounting principles and concepts?

Answer 1

Accounting basics are the building blocks of accounting theory such as:

- what asset, liabilities, equity, revenue and expenses are;

- double sided accounting; and

- time value of money.

Accounting concepts generally refers to the four pillars of accounting theory:

- Going Concern: the assumption that the company you are accounting for is going to continue to operate in the future (and not be wound-down or go bankrupt unless there is compelling evidence to the contrary).

- Consistency: the accountant will use the methods of valuing and recording transactions year-over-year unless they disclose otherwise.

- Conservatism: the accountant will be cautious about what and when they record items on the books.

- Matching: revenues and expenses which are related should be recorded over the same accounting period.

Accounting Principles:

Each region (ie. Canada, US, UK, etc...) have their own accounting principles these are specific guidelines as to how process, value, record and evaluate accounting transactions.

Canadian Accounting principles are called Canadian Generally Accepted Accounting Principles (CDN GAAP) which "provides the framework of broad guidelines, conventions, rules and procedures of accounting". Issued by Accounting Standards Board (AcSB).

United States principles are called US Generally Accepted Accounting Principles (US GAAP) which "is the standard framework of guidelines for financial accounting [which] includes the standards, conventions, and rules Accountants follow in recording and summarizing transactions, and in the preparation of financial statements. Issued by the Financial Accounting Standards Board (FASB).

Both are moving towards international GAAP as set by the International Accounting Standards Board (IASB).