Autobiography meaning and definition of accounting principles
Autobiography meaning and definition of accounting principles
Autobiography meaning and definition of accounting principles answer.
#2 - Consistency principle:
If a company follows an accounting principle, it should keep following the same principle until a better one is found.
If the consistency principle is not followed, the company will jump around here and there, and financial reporting will be messy. As a result, it would be difficult for investors to see where the company has been going and how it is approaching its long-term financial growth.
#3 - Conservatism principle:
As per the conservatism principle, accounting faces two alternatives – one, report a more significant amount, or two, report a lesser amount.
Autobiography meaning and definition of accounting principles pdf
To understand this in detail, let’s take an example. Let’s say that Company A has reported that it has machinery worth $60, as its cost. Now, as the market changes, the selling value of this machinery comes down to $50, Now the accountant has to choose one from two choices – first, ignore the loss the company may incur on selling the machinery before it’s sold; second, report the lo