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definition of accounting principles

Accounting principles

What are the types of accounting?
Accounting is defined as a method of recording and documenting the financial information of any company or financial institution, and the importance of accounting lies in facilitating the understanding of financial information through its arrangement and organization. Accounting includes: financial accounting, management accounting, tax accounting, cost accounting and credit accounting. Accounting principles are a set of standards and rules by which the world of accounting is controlled, which is based on the unification of definitions, assumptions and rules used in the world of accounting, and the following are the most prominent Accounting principles:
definition of accounting principles
definition of accounting principles

Principle of regularity

The principle of regularity is a principle that indicates that the accountant is committed and applied to all the rules and laws applied in accounting that include multiple accounting works in the company or organization in which he works.

Consistency principle

It is a principle that unifies the process of data entry and reporting, so that all accounting data and information are entered in a unified manner for all accountants, which leads to reducing errors and avoiding contradictions between them. the changes.

The principle of consistency provides receptivity to the updates of the accounting system, so that the institution that uses a specific system and adopts it for long periods will be able to compare the results obtained from one period to another, and if the principle or method is changed, it will be with the aim of improving the usefulness of financial results.

Principle of sincerity

According to this principle, it is the duty of all accountants to present the financial position of the institution honestly and transparently, in order to reflect the correct financial position of the institution, as the information provided by the accountant must be honest and accurate.

The principle of constancy of methods

The focus in this principle is on the need for a consistent pattern used in the procedures in which financial reports are prepared, and this principle is closely related to the principle of consistency, so that one fixed method is used in all financial and accounting matters, and financial reports related to the institution are prepared in the same basic methods without change .

principle of non-compensation

It is a principle that obliges the accountant to disclose all financial statements of the institution, whether positive or negative, without expecting compensation or compensation for debt through the original budget or revenue, and this principle states that no entity or institution should expect financial compensation, and it should It presents its reports accurately as is.

The principle of continuity

In this principle, it is assumed that the institution will continue to operate in the future and will not stop, and that the work of the institution will continue as it did in the first place; That is, based on the basic rules on which it is based; This means that the institution's work in the future must be in line with what happened and was built in the past.

cyclic principle

In the principle of periodicity, the process of distributing accounting entries to appropriate periods of time determined by the institution according to its needs, as the institution must report its financial results during specific periods of time, which can be monthly, quarterly or annually, as this period will be approved during the coming years , in order to compare companies' profits from one year to another, and on the basis of this comparison, accounting procedures are devised that support the continuous and standardized production of financial statements during the specified time period.

The principle of materiality

The principle of materiality requires that the financial reports of the institution be clear and able to reveal the true financial health of the institution, however, it is possible to ignore the element or material that does not have a significant impact on the outcomes, and in global systems such as the stock exchange, any element that represents no less than For 5% of the total fixed assets separately from the balance sheet, however, an element that represents less than this percentage can be considered if this small element changes the net profit to a loss, then it is considered a material element and based on the importance of this element, it will be included in the financial statements like any other The important elements.

The principle of honesty in transactions

The principle of honesty in transactions states that the legal obligation of the person who will buy or sell a good or service to provide complete and correct information, where financial advisors bear the responsibility to act and act with the utmost good faith when dealing with customers, and between any two parties between financial transactions is the signing of a credit contract In it there is a clause that requires the two parties to act with the highest degree of honesty and faith towards each other, and this principle is fundamental in the insurance law.

Historical Cost Principle

It is a principle specialized in stating the historical cost of a particular item, in which the monetary equivalent or the cash that was paid to purchase this item is indicated, and the original cash is not adjusted with inflation, with the historical cost recorded in the financial statements of the institution, and this principle serves companies and institutions, So that recording the historical cost of the good or service and reporting it in the balance sheet will give the goods their true value without exaggeration, monitor it and deliver it to the original, which maintains objectivity, and this principle is one of the tests that auditors conduct on the main assets.

revenue recognition principle

It is a principle that stipulates that the institution's revenues must be entered at the time of its arrival without delay, so that when selling a product or providing a service that deserves a financial return to the institution, it must be entered and recorded immediately and reported on its receipt, and the process of recognizing these revenues takes place whether or not the funds are received .

The principle of imposing economic unity

This principle provides for the separation of the institution or commercial activity from the financial activities of the employer, and the consideration of the commercial activity of the institution as a separate private entity. This principle is based on the existence of an accounting principle that distinguishes between the transactions carried out by the institution and the transactions of the owner, and this principle may be used in the process of separating the departments of institutions or companies from each other, so that each unit maintains its own records and transactions, and is responsible for them, which is It is not only intended for large organizations, so it can be used if the organization is small but multitasking.

interview principle

In this principle, the revenues achieved by the institution are matched with the expenses in a certain period of time, and this requires institutions to use the accrual basis of accounting, and it is very necessary to match the income with the expenses in the same period in which the income is achieved, regardless of whether the payment process is completed or not Expenses are compared with revenues during a specified period of time in order to report the profit that has been achieved, and the principle of the interview is based on the cause and effect relationship, and if matching is not possible, the expenses will be recorded immediately.

The principle of imposing the monetary unit

This principle means that all commercial transactions that can be expressed in a monetary currency can be recorded only, assuming that this currency remains relatively stable over time. For example, when looking at US account statements, the numbers refer to the dollar value rather than the number of physical units.

Accounting principles are a large set of guidelines and laws that regulate and control the accounting work in all financial sectors. Financial, and is based on serving the institution and preserving its rights from loss or the occurrence of errors.

Accounting Cycle

How is the accounting work done in detail?
The accounting cycle means a series of interrelated and sequential financial procedures and operations, each of which depends on the process that precedes it and is considered a prelude to the next process. Accounts payable and debited to prepare the trial balance.

Inventory adjustments are prepared for the purpose of amending accounting recording errors in order to prepare the financial statements, which are: the income statement, the statement of financial position, the statement of cash flows and the statement of profits and losses, in addition to the list of disclosures that contain details that enhance the information contained in the financial statements and make the relevant authorities able to evaluate the activity of The entity in the relevant financial period.

The work related to accounting is carried out through a sequential and regular series of operations, and this series is called the accounting cycle, and the operations in the accounting cycle are sequential; That is, each process depends on the process that preceded it, and each process is a prelude to the next.
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