GAAP

The Principle of Regularity

Requires accountants to adhere strictly to GAAP guidelines in preparing financial reports.

The Principle of Consistency

Once an accounting method is chosen, it should be used consistently across periods.

The Principle of Sincerity

Accountants must provide an accurate and honest portrayal of a company’s financial situation.

The Principle of Conservatism

Financial statements should present the least optimistic outcome when faced with uncertainty.

The Principle of Continuity

Assumes that a business will continue operating in the foreseeable future unless there is clear evidence to the contrary.

The Principle of Periodicity

Financial reporting should be done for specific and consistent time periods.

The Principle of Full Disclosure

All financial information relevant to understanding a company’s financial position must be disclosed.

The Principle of Materiality

Only information that would influence the decision of a reasonable user of financial statements should be disclosed.

The Principle of Matching

Expenses should be recognized in the same period as the revenues they help generate.

The Principle of Revenue Recognition

Revenue is recognized when it is earned and realizable, regardless of when cash is received.

The Principle of Historical Cost

Assets should be recorded at their original purchase price rather than their current market value.