10 Basic Accounting Principles

10 Basic Accounting Principles: You need to master the basic principles of accounting in preparing financial statements properly. To note, these principles are needed as guidelines so that the financial statements that you make can be according to procedures. The basic principles of accounting are actually usually the material in accounting subjects. maybe some of you don’t remember these ten principles.

1. The historical cost principle

The first principle means that in compiling financial statements, you must record every cost that goes out to get the goods. You are required to calculate all transactions, be it the value of goods, services, and others. For example, when a company buys an air conditioner, then you also have to calculate the price of the air conditioner and other costs, such as the cost of installing air conditioning or transportation costs.

2. The principle of revenue recognition

This basic accounting principle requires you to record the price obtained from the delivery of goods or services as income. For example, when a company earns Rp10 million from the sale of a car, then apart from being recognized as ‘Wealth’, the Rp10 million is also considered as ‘Revenue’.

3. The principle of matching

The next principle is the matching principle. This principle is still related to the previous principle. The difference is that the ‘income’ must be matched with the costs that must be incurred when transacting. It serves to find out whether a company is in a profit or loss situation. If revenue is greater than expenses, then the company is making a profit. Vice versa.

4. The principle of consistency or consistency

The principle of consistency means that in preparing financial statements, the methods and standards used must be applied consistently. For example, a company uses an accrual basis system. The system should not be changing. Because if it continues to change and is inconsistent, users of accounting information will be more difficult to analyze financial statements. These basic accounting principles reflect the accuracy of their constituents.

5. The principle of full disclosure

This principle requires you to present the information in the financial statements completely completely. Because users of accounting information certainly need complete information in order to make the right decisions. If any information is missed, questions will arise about a company’s finances.

6. The principle of economic entity or economic entity

The principle of economic entity as a basic principle of accounting is an economic information system that must stand alone. You cannot enter personal financial statements or other parties into the company’s financial statements. For example, a company has cash flows with certain transactions. The owner of the company wants to know the financial status of the company. Therefore, these financial statements must be prepared specifically. Do not let the company owner’s personal transactions that are not related to his business actually enter the company’s financial statements.

7. Principles of accounting period

The principle of accounting period means that you have to make a certain period limit in preparing the company’s financial statements. This principle is very necessary so that the financial statements have a clear time period. Each period of financial statements also varies. Some depend on agreement and consistency between previous financial statements. One period of financial statements also varies. It can be in 1 month, 3 months, 4 months, 6 months, even 1 year.

8. Principle of monetary unit

The next basic accounting principle is the monetary unit principle. Monetary unit means the unit of money used in the calculation of financial statements. For example, using rupiah, dollars, and so on.

9. The principle of business continuity or going concern

The principle of business continuity or going concern means that a company should continue to run continuously. Except for certain events that affect it. However, an economic entity must continue to operate.

10. The principle of materiality

The last principle is the principle of materiality. This principle assumes that accounting measurements and records are materialistic or valuable. That is, an accounting information has a nominal value and can be sold. If an accounting information has a nominal value and can influence users in making decisions, then the information contains materiality value. Thus the 10 basic accounting principles that you need to know in preparing company accounting financial statements. The goal is that the reports you make can be precise and up to standards.