Basic accounting principles.

Cost principle Cost refers to the amount spent when an item was originally obtained, whether that purchase happened last year or 10 years ago; amounts are not adjusted upward for inflation. The amounts shown in financial statements are referred to as historical cost amounts Full disclosure principle In preparing financial statements, the accountant should include sufficient information to permit the stakeholders to make an informed judgement about the financial condition of the enterprise. Matching principle Requires that expenses be matched with revenues. Meaning, in a given accounting period, the recorded revenue should have an equivalent expense recorded, in order to show the true profit of the business. Revenue recognition principle Revenues are recognized as soon as goods have been sold or a service has been rendered, regardless of when the money is actually received. Materiality principle Business transactions that may affect the decision of a user of financial information are considered important or material, and thus, must be reported properly. Conservatism principle States that given two (2) options in the valuation of business transactions, the amount recorded should be the lower value rather than the higher value. Matching principle Requires that expenses be matched with revenues. Meaning, in a given accounting period, the recorded revenue should have an equivalent expense recorded, in order to show the true profit of the business. Revenue recognition principle Revenues are recognized as soon as goods have been sold or a service has been rendered, regardless of when the money is actually received. Materiality principle Business transactions that may affect the decision of a user of financial information are considered important or material, and thus, must be reported properly. Conservatism principle States that given two (2) options in the valuation of business transactions, the amount recorded should be the lower value rather than the higher value. Objectivity principle Requires business transactions to have some form of impartial supporting evidence or