BBA 1st Semester Bookkeeping Notes

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Basic Principles of Accounting

In addition to the basic assumption, account

Revenue Recognition: In accounting, terminology revenue is the amount received or receivable from sale of goods. The principles explain when we should assume some revenue to have been earned. It will enable us to identify the period for which the revenue has been According to the accounting period assumption revenue must be concerned with the specific accounting period. We can determine the revenue as realized on the Sales basis, cash basis and production basis.
Historical Cost : Accounting to the historical cost principles, “All business transactions must be recorded in the books of accounts at their monetory cost of acquisition this principle is called historical, because the balance of assets and liabilities is carried forward from year to year at its acquisiation cost, irrespective of increase or decrease in the market value of assets”.
Matching Concept (2004,06) :This is based on the accounting period concept. The principle objective of running a business is to earn profit. In order to determine the profit made by the business during a period, it is necessary that revenue of the period should be matched with the costs for the period. Thus the matching principle holds the expenses should be recognised in the same period as associated revenue.
Verifiability— Objectivity and Evidence : This principles of verifiable of objectivity means that every business record must be based on supported by documentary evidence. We do not pass any entry or make any posting in subsidiary books unless there is a voucher used as documents for recording business transaction.

According to the principles of objectivity, accounting should be definite, Verifiable and free from manipulation and personal bias.