The accounting principles can be defined as the fundamental ideas upon which accounting practice is based. Accounting professionals and business managers are guided by accounting principles. These principles have been variously termed by various writers as Conventions, Postulates; Axioms are just a few of the terms used by writers Of these principles, four have been singled out as having universal acceptability and have been called concepts.
The Business Entity Principle
A business' financial information is recorded and reported separately from the owner’s personal financial information. In another way, the business is seen as an entity separate from its owners or proprietors. A person who owns a business may also own a personal house and car. However, an individual’s business financial record should not include information about the individual’s personal belongings.
The Historical Cost Principle
Assets and expenses are entered into the books at their actual cost to the business. The justification for this principle is that historical cost is objective and verifiable. This principle provides a universal, consistent and simple method of recording assets and expenses.
