Generally Accepted Accounting Principles

Business Entity Concept

Accounting for a business organization must be kept separate from personal affairs of the owner.

Principle of Conservatism

Accounting for a business should be fair and reasonable.

Cost Principle

Accounting for purchases must be at the cost price of the purchaser.

Objectivity Principle

Accounting is recorded based on objective evidence.

Time Period Concept

Accounting will take place over specific time periods known as fiscal periods.

Full Disclosure Principle

All information needed for a full understanding of the company's affairs must be included in the financial statements.

Continuing Concern Concept

Assumes business will continue to operate unless known it will not.

Matching Principle Concept

Each expense related to revenue earned must be recorded in same period as the revenue it helped earn.

Materiality Principle

Requires accountants to include in a firm's financial statements any information that could be considered important to the users of that info.

Consistency Principle

Requires that a business must use the same accounting methods and procedures from period to period. (Prevents people from manipulating figures)

Revenue Recognition Convention

Revenue must be recorded in the accounts at the time the transaction is completed.