GAAP Principles

• What is the historical cost principle?

  An accounting principle that requires businesses to record assets and purchases at the price they paid for them without adjusting for changes in market value.
• What is the revenue recognition principle?

  An accounting principle that requires companies to record revenue when it is earned, not when it is collected.
• What is the matching principle?

  An accounting principle that requires businesses to match and record expenses with their respective revenues in the period they were incurred, not when they are paid.
• What is the full disclosure principle?

  An accounting principle that requires businesses to disclose any information that would affect a financial statement user's decisions about the company.
• What is the cost benefit principle?

  An accounting principle that limits the required amount of research and time to record or report financial information if the cost outweighs the benefit.
• What is the conservatism principle?

  An accounting principle that states that accountants should always err on the most conservative side possible with estimations, i.e. estimating revenues lower and estimating expenses higher.
• What is the objectivity principle?

  An accounting principle that states that financial statements, accounting records, and financial information should be independent and free from bias.
• What is the consistency principle?

  An accounting principle that states that all accounting principles, assumptions, and practices should be applied consistently from one period to the next.