BASIC PRINCIPLES

OBJECTIVITY PRINCIPLE
 States that all the business
transactions that will be entered
in the accounting records must
be duly supported by verifiable
evidence.
 HISTORICAL COST
 This means that all the
properties and services acquired
by the business must be
recorded at its original
acquisition cost.
 ACCRUAL PRINCIPLE
 States that income should be recognized
at the time it is earned such as goods are
delivered or when services have been
rendered. Likewise, expenses should be
recognized at the time they are incurred
such as when goods and services are
actually used and not at the time when the
entity pays for those goods and services.
 ADEQUATE DISCLOSURE
 States that all material facts that
will significantly affect the
financial statements must be
indicated.
 MATERIALITY
 Means that financial reporting is only
concerned with information significant
enough to affect decisions. This refers
to the relative importance of an item or
event. An item is considered significant
if knowledge of it would influence
prudent users of the financial
statements.
 CONSISTENCY
 Means that approaches used in
reporting must be uniformly
employed from period to period to
allow comparison of results
between time periods. Any
changes must be clearly
explained.