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Accounting principles are the rules, regulations, norms, and guidelines used by accountants to record business transactions and prepare financial statements.
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Principles are categorized into Accounting Concepts (assumptions on which accounting is based, which do not change) and Accounting Conventions (practices followed over a period of time, which may change to improve quality).
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GAAP stands for Generally Accepted Accounting Principle, representing the collective framework of principles, concepts, and conventions followed by enterprises.
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Features of accounting principles include being man-made (based on best possible suggestions rather than lab tests), flexible (can change with the business environment), and generally accepted.
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Going Concern Assumption assumes the business will continue for a foreseeable period with no intention to close down or scale down operations significantly; it dictates the distinction between capital and revenue expenditures and recording fixed assets at original cost.
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Consistency Assumption states that once an accounting method or practice is selected, it should be applied consistently year after year to make financial statements comparable and eliminate personal bias.
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Accrual Assumption dictates that transactions are recorded when they occur, not when cash settlement takes place; revenue is earned when legal title passes, and expenses are incurred when the obligation to pay arises.