Generally Accepted Accounting Principles

• Principle of regularity: Regularity can be defined as conformity to enforced rules and laws.
• Principle of consistency: The consistency principle requires accountants to apply the same methods and procedures from period to period.
• Principle of sincerity: According to this principle, the accounting unit should reflect in good faith the reality of the company’s financial status.
• Principle of the permanence of methods: This principle aims at allowing the coherence and comparison of the financial information published by the company.
• Principle of non-compensation: One should show the full details of the financial information and not seek to compensate a debt with an asset, revenue with an expense, etc.
• Principle of prudence: This principle aims at showing the reality “as is”: one should not try to make things look prettier than they are. Typically, revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable.
• Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle mitigates the principle of prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value.
• Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription (or lease, etc.), the given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction.
• Principle of Full Disclosure/Materiality: All information and values pertaining to the financial position of a business must be disclosed in the records.