The following points highlight the four main considerations which guide the selection of accounting principles. The considerations are: 1. Accurate Presentation 2. Conservatism 3. Profit Maximization 4. Income Smoothing. Consideration # 1. Accurate Presentation: One of the criteria for assessing the usefulness of accounting information is accuracy in presentation of the underlying events and transactions. This criterion may be used [...]
In this article we will discuss about Accounting Theory:- 1. Definition of Accounting Theory 2. Role of Accounting Theory 3. Classification 4. Research Methodology 5. Approaches 6. Methodology 7. Other Approaches. Definition of Accounting Theory: The term 'accounting theory' has been defined by many. Hendriksen defines accounting theory as: Logical reasoning in the form of a set of broad principles [...]
The following points highlight the eight important principles of accounting. The principles are: 1. Cost Principle 2. Dual-Aspect Principle 3. Accrual Principle 4. Conservatism Principle 5. Matching Principle 6. Consistency Principle 7. Materiality Principle 8. Full-Disclosure Principle. Accounting Principle # 1. Cost Principle: The cost principle requires that assets be recorded at their exchange price, i.e., acquisition cost, or historical [...]