Financial Statements

Chapter 1. Twelve Basic Principles

Accountants have some basic rules and assumptions upon which rest all their work in preparing financial statements. These accounting rules and assumptions dictate what financial items to measure and when and how to measure them. By the end of this discussion, you will see how necessary these rules and assumptions are to accounting and financial reporting.

So, here are the 12 very important accounting principles:

1. accounting entity

2. going concern

3. measurement

4. units of measure

5. historical cost

6. materiality

7. estimates and judgments

8. consistency

9. conservatism

10. periodicity

11. substance over form

12. accrual basis of presentation

These rules and assumptions define and qualify all that accountants ...