DEFINITION OF 'ACCOUNTING PRINCIPLES'The rules and guidelines that companies must follow when reporting financial data. The common

set of accounting principles is the generally accepted accounting principles (GAAP). To remain

listed on many major stock exchanges in the U.S., companies must file regular financial

statements reported according to GAAP. Accounting principles differ around the world, and

countries usually have their own, slightly different, versions of GAAP. 

INVESTOPEDIA EXPLAINS 'ACCOUNTING PRINCIPLES'Since accounting principles differ across the world, investors should be aware of these

differences and account for them when comparing companies in different countries. The problem

of differences in accounting principles does not much affect mature markets. Still, investors

should be careful, since there is still leeway for the distortion of numbers under many sets of

accounting principles.

Accounting Principles are classified into two categoriesA) Accounting conceptsB) Accounting Conventions

A) Accounting concepts1)Business entity concept - business is separet entity from owner2)Dual Aspect concept - Liabilities = Assets (dr = cr)3)Going concern concept - business is going to be in existence for an indefinitely long time.4)Accounting period concept - Indefinite long period is divided into short span for accounting purpose.5)Cost concept - cost of aquisition of assets is considered for accounting (considering depriciation) and not current price of assets.6)Money measurement concept - only facts which can be measured in money find place in accounting.7)Matching concept - expences and costs incurred during period whether paid or not must match the revenue for that particular period.

B)Accounting Conventions1) Convention of conservation2)Convention of Materiality3)Convention of Consistency 

MATCHING

Revenues and Expenses shown on the income statement must be matched for the period.

BUSINESS ENTITIES

Every business unit/enterprise is treated as a separate entity, separating the business from the owners.

GOING CONCERN

Unless strong evidence to the contrary, it is assumed that a business will continue to operate into the future, for a period longer than the life expectancy of its assets. BASIC ACCOUNTING

PERIODICITY

The environment in which accounting operates requires that the life of a business be divided into accounting periods of not more than one year in length and that test readings of the progress of the business be made at the end of each period.

CONSERVATISM

The accountant should be conservative in his/her estimates and opinions and in his/her selection of procedures, choosing those that neither unduly understate nor overstate the situation. BASIC ACCOUNTING

CONSISTENCY

Consistent application in the company of any given accounting method, period after

period.

EFINITION OF 'ACCOUNTING POSTULATE'A fundamental assumption in the field of accounting. Like any field, the present system of

accounting has certain underlying axioms which form the basis of the all further work. Accounting

postulates are generally very well agreed upon and form the foundation of the discipline.

INVESTOPEDIA EXPLAINS 'ACCOUNTING POSTULATE'Accounting postulates include statements that economic activity conducted by certain identifiable

entities will be continuous, that transactions occur at identifiable times and that the entity will

continue as a going concern. None of these postulates are controversial, however they do

highlight how difficulties can arise in advanced accounting practices.

For example, for certain transactions, there may be disagreement upon the timing for recording

items of revenue and expense. In cases of mergers, there are certain issues with how to most

accurately account for certain items. Guidelines must be developed for these advanced topics so

that they fit within the accounting framework.