Accounting Concepts and Principles

A set of rules, procedures, and conventions widely accepted in accounting practices.

A set of standardized accounting rules and principles that companies use to prepare financial statements.

The organization responsible for creating and updating GAAP in the United States.

A set of accounting standards that are used internationally.

A set of accounting standards that are specific to the United States.

The practice of ensuring financial statements are consistent from year to year using the same method.

GAAP helps make financial reporting uniform and understandable, making it easier to compare companies and industries.

To ensure the completeness and accuracy of financial statements, companies get them reviewed by independent auditors.

This accounting principle assumes that a company will continue to operate in the foreseeable future and won't be liquidated.

An accountant's meaning of 'cost' refers to the amount initially spent when an item was purchased, no matter when it happened.

This principle dictates that all information important to investors and lenders should be included in financial statements or notes.

This principle assumes that a business's financial activities can be divided into distinct time periods for reporting.

This principle states that the amount spent when an item was originally purchased is used to value assets. The value is not adjusted for inflation.

The practice of having a neutral and objective perspective when preparing financial statements, ensuring they are free from bias.

This principle requires all financial statements to be prepared using the same currency, making it easier for comparison.

Financial transactions of a business are kept separate from the owner's personal transactions for accounting purposes.

Only transactions that can be expressed in Naira are recorded, assuming its purchasing power remains constant over time.

Revenue is recognized when earned, not when cash is received. Expenses are matched to the revenue they help generate.

Financial information presented in a clear and understandable way for users to make informed decisions.

Companies must record assets, liabilities, and equity at their fair market values, which is their estimated current worth.

Ensure that financial statements are prepared with a degree of caution and not exaggerating profits.

Accounting principles represent widely accepted rules and conventions that guide sound accounting practices. They form a consensus on how financial information should be recorded, presented, and interpreted.

The economic entity assumption distinguishes between a business's financial activities and the personal transactions of its owner. It ensures that accounting records only include transactions related to the business.

The monetary unit assumption requires all financial transactions to be recorded in a specific currency. It assumes that the currency's value remains stable over time.

The financial report that shows a company's profitability over a specific period.

The fees or incomes earned by a company during a specific period.

The principle that requires recognizing revenues when they are earned, not when cash is received.

The costs used up by a company in performing its main operations.

A net amount related to transactions that are not part of a company's primary operations, resulting in a gain.

A net amount related to transactions not part of a company's primary operations, resulting in a loss.

This principle states that a company's financial activities can be divided into specific periods, like a year or a quarter, for reporting.