What are Accounting Principles?
Definition: Accounting principles are the building blocks for GAAP. All of the concepts and standards in GAAP can be traced back to the underlying accounting principles. Some accounting principles come from long-used accounting practices where as others come from ruling making bodies like the FASB.
It’s important to have a basic understanding of these main accounting principles as you learn accounting. This isn’t just memorizing some accounting information for a test and then forgetting it two days later. These principles show up all over the place in the study of accounting. Trust me. After you know the basic accounting principles, most accounting topics will make more sense. You will be able to reference these principles and reason your way through revenue, expense, and any other combination of problems later on in the study course.
List of 10 Basic Accounting Principles
Here’s a list of more than 5 basic accounting principles that make up GAAP in the United States. I wrote a short description for each as well as an explanation on how they relate to financial accounting.
- Historical Cost Principle
- Revenue Recognition Principle
- Matching Principle
- Full Disclosure Principle
- Cost Benefit Principle
- Conservatism Principle
- Consistency Principle
- Objectivity Principle
- Accrual Principle
- Economic Entity Principle