Accounting Principles

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There are three main principles of accounting:

1. The Revenue Principle – recognizes the transactions when they are entered into books for example advance in the month of March for the sale to be made in the month of May, revenue will be recognized in the month May when the sale is being made.

2. The Matching Principle – the amount should be matched at the end of financial year like for example amount spent upon the machinery, a part is debited to the profit and loss account as depreciation and the balance only shown in the balance sheet.

3. The Full disclosure Principle – All financial statements are supported by footnotes. For example the value of the assets and the mode of valuation of value of assets need to be disclosed.

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