15. Accounting Principles and Concepts
Accounting principles and concepts serve as the foundation for financial reporting, ensuring uniformity, reliability, and comparability in accounting practices. They are critical for stakeholders to make informed decisions and understand financial data across organizations. With the integration of technology in business, these principles become essential for software developers and financial professionals alike.
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What we have learnt
- Accounting principles guide the preparation of financial statements, ensuring consistency and comparability.
- There are fundamental concepts and conventions that shape financial reporting and accounting practices.
- Understanding accounting principles is crucial for technology applications in finance such as ERP systems and AI models.
Key Concepts
- -- Accounting Principles
- Rules and guidelines for reporting financial data, ensuring reliability and consistency.
- -- Business Entity Concept
- Treats the business as a separate entity from its owner, recording transactions from the business's perspective.
- -- Going Concern Concept
- Assumes that the business will continue its operations indefinitely unless otherwise stated.
- -- Accrual Concept
- Records revenues and expenses when they are earned or incurred, rather than when cash is exchanged.
- -- Conservatism
- Principle of anticipating no profit but providing for all possible losses, recognizing expenses and liabilities quickly.
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