U-1 T-2 L-2 (Accounting Principles-1) - YouTube

greetings of the day viewers let's  start today's topic financial accounting  

preferably about the accounting principles  accounting principles are the building blocks for  

gaap gaap stands for generally accepted  accounting principles 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 whereas others come from  

ruling making bodies like f a s b 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 here we will discuss basic accounting  principles that make up gap in the united states  

namely the 10 most common accounting  principles are historical cost principle  

revenue recognition principle matching  principle full disclosure principle  

cost benefit principle conservators principle  consistency principle objectivity principle  

accrual principle economic entity principle  firstly we'll talk about historical cost principle  

historical cost principle requires companies  to record the purchase of goods services  

or capital assets at the price they paid for them  assets are then remaining on the balance sheet  

and they are historical without being adjusted  for fluctuations in market value the second one is  

revenue recognition principle revenue recognition  principle requires companies to record revenue  

when it is earned instead of when it is collected  this accrual basis of accounting gives a more  

accurate picture of financial events during the  period after the matching principle comes matching  

principle states that all expenses must be matched  and recorded with their respective revenues in the  

period that they were incurred instead of when  they are paid this principle works with the  

revenue recognition principle ensuring all revenue  and expenses are recorded on the accrual basis the  

fourth principle is full disclosure principle  full disclosure principle requires that any  

knowledge that would materially affect a financial  statement user's decision about the company must  

be disclosed in the footnotes of the financial  statements this prevents companies from hiding  

material facts about accounting practices or known  contingencies in the future next principle to talk  

about is cost benefit principle cost benefit  principle limits the required amount of research  

and time to record or report financial  information if the cost overrates the benefit  

thus if recording an immaterial event would  cause the company a material amount of money  

it should be forgone the sixth principle is  conservative principle conservatism principle  

tells accountants should always error on the  most conservative site possible in any situation  

this prevents accountants from over estimating  future revenues and underestimated future expenses  

that could mislead financial statement users if we  talk about objectivity of financial statement then  

it comes under objectivity principle objectivity  principle talks about financial statements  

accounting records and financial information as  a whole should be independent and free from bias  

the financial statements are meant to convey  the financial position of the company and not  

to persuade end users to take certain actions  the eighth principle is consistency principle  

consistency principle requires all accounting  principles and assumptions should be applied  

consistently from one period to the next this  ensures that financial statements are comparable  

between periods and throughout the company's  history when we talk about the accrual concept  

of accounting it follows the accrual principle  the accrual principle is an accounting concept  

that requires accounting transactions to be  recorded in the time period in which they occur  

regardless of the time period when the actual  cash flows for the transaction are received  

the last accounting principle is economic  entity principle the business entity or  

the economic entity assumption is an accounting  principle that makes a legal distinction between  

the transaction carried out by a business and the  transactions of the owner it might also sometimes  

refer to the separation of different divisions  in a company each unit maintains records  

of its operations and is responsible for its own  transactions in next lecture we will continue the  

topic financial accounting with more depth and  will talk about the accounting principles with  

accounting conventions till the time keep grabbing  knowledge for bright upcoming days thank you