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Principles of Financial Accounting

The financial market and its components

The profession of trade and sale is one of the most important components of the financial market, where money is the main element and the basic ingredient for commercial operations. Examples of the trade profession are the so-called retail trade, and the import and export of a group of goods and tools such as electronic and technological devices, clothing, furniture, etc., so traders depend in the operations of Selling or importing and exporting capital as an essential element through which the amounts resulting from the commercial goods that are imported, or the commercial goods that are manufactured, exported or sold, are paid, and financial accounting is the main element in financial operations and accounts, and in this article we will talk about the principles of accounting Finance.

Definition of financial accounting

is defined as a set of scientific principles, rules and financial foundations that are concerned with recording and controlling financial operations in a particular company. It has the balance sheet, income statement and tax returns. Financial accounting is one of the means of measuring economic performance in terms of financial revenues and expenditures, and it is also considered the most important element in making administrative decisions for the institution.

Principles of Financial Accounting

Principles of Financial Accounting
Principles of Financial Accounting

Accounting principles in their general form are considered a set of rules and guidelines that a company must follow when reporting financial statements, as companies must submit regular financial statements in accordance with basic and accepted accounting principles, and accounting principles help control the world of accounting according to general accounting rules and concepts, and they include These accounting principles of financial accounting, and the following is a mention of the most important principles of financial accounting:
  • The principle of accrual and revenue recognition: according to this principle, revenues are recognized and recorded in the accounting books and records when they are realized, and expenses are recognized when they are incurred regardless of the payment of those expenses.
  • Cost principle: This principle includes the amount spent in cash within the list of accounting assets, as the value of this amount cannot be adjusted.
  • The principle of preservation: which includes detecting losses and profits or anticipating them before they occur.
  • The principle of continuity: This principle includes the payment of all financial obligations incurred by the institution, in order to achieve commercial objectives and not be exposed to bankruptcy or liquidation and to ensure the continuity of the institution's work.
  • The principle of full disclosure: through this principle, all financial information of the institution related to a specific period of time is determined and disclosed to certain official bodies.
  • Matching principle: This principle is concerned with matching the revenues received or accrued and the expenses paid or accrued according to the accrual basis of accounting.
  • The principle of the accounting period: Through this principle, the commercial activities that take place in the institution are determined during a specific period of time, in order to facilitate the accounting operations.
  • The principle of imposing monetary union: This principle includes measuring the economic activity of organizations and institutions in US dollars.
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