Basic Principles of AccountingMeasu

Basic Principles of Accounting

Measurement: cost principle (IFRS Requires that companies account for and report many assets and liabilities on the basis of acquisition price) vs fair value principle (the amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgable, willing parties in an arm’s length transaction.
Revenue recognition: indicates that revenue is to be recognised when it is probable that future economic benefits will flow to the company and reliable measurement of the amount of revenue is possible. Recognition can be done during production, end of production, time of sale (provides a uniform and reasonable test), time cash received.
Expense recognition: (follow the definition) let the expense follow the revenues. Some companies recognises expense not when they pay wages or make a product, but when the work (service) or the product actually contributes to revenue. Sometimes, cost are allocated to expense (depreciation expense). Different between expense and cost. Cost is
Full disclosure: it recognises that the nature and amount of information included in financial reports reflects a series of judgemental trade-offs. These tradeoffs strive for (1) sufficient detail to disclose matters that make difference to users (2) sufficient condensation to make the information understandable, keeping in mind costs of preparing and using it. It includes notes to financial statements and supplementary information that present the detail of financial information.