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Basic Accounting Principles
Basic Accounting Principles A number of basic accounting principles have been developed through common usage. They form the basis upon which modern accounting is based. The best-known of these principles are as follows: Accrual principle . This is the concept that accounting transactions should be recorded in the accounting periods when they actually occur, rather than in the periods when there are cash flows associated with them. This is the foundation of the accrual basis of accounting. It is important for the construction of financial statements that show what actually happened in an accounting period, rather than being artificially delayed or accelerated by the associated cash flows.If you ignored the accrual principle, you would record an expense only when you paid for it and income only what you gain. For examples: Mahesh buy a good form Hari Rs.5,00,000\- and paid him Rs.3,00,000\- and sold ...
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