Accounting method of General Principles
Principles relating to solve the general problems of business are known as General principles. The main General Principles are as under:
(1) Principle of Clarity: According to this principle,
all accounting work should be done with great devotion and honesty so that all important facts may be revealed clearlynand the informational financial status may be known easily.
(2) Principle of Fluctuation of Capital and Income
Transactions: All such transactions which results in fluctuation of capital should be shown separately and the items of increase or decrease in income should also be shown separately. If both the changes are in same direction, then the limits of such changes should be mentioned.
(3) Principle of Information regarding Financial
Aspect: Under it, accounting is done in such a manner thatnall important and relevant information should be available easily. The correct earning capacity and actual economic status can be known by these accounts.
(4) Principle of Decision of Division of Investment
and Income during different periods: According to this principles, the investment made and income earned are to benpresented separately so that completeness and honesty of accounting may be proved.
(5) Principle of Reliable Historical Accounts: The
work of accounting should be done with complete reliability and on the basis of customs. The modern techniques are to be included in such a manner so that reliability may remain intact. Accounts are to be prepared in such a way that in future also it may be analysed and distinction between capital and revenue may be explained easily.
(6) Principle of Physical and financial Information:All such events are to be incorporated in accounting, which are useful and important for business and are helpful in providing necessary physical and financial information relatednto the concern.
(7) Principle of Equality of items in Time Period:
This principle indicates the uniformity in the use of items in various periods. According to this principle, the items which are used in one period, the same should be applied for other clearly.
(8) Principle of Total Awareness: According to this principle, arrangements should be made for future risks andbuncertainties while accounting, but there should not be any hope for profits. Accordingly the accounting work is to be done keeping in mind the future expected doubts in mind.
(9) Principle of Expressing Transaction in Monetary Form: According to this principle, every transaction should be converted in monetary terms, then it should be recorded in accounting, and those transactions are to be ignored which cannot be evaluated in monetary terms.
Hence, it can be concluded that Accounting principles provide direction and cooperation to accountant from preliminary entries upto the preparation of final accounts.