Accounting Concepts and Principles FAQs What are the fundamental accounting concepts and principles? The fundamental accounting concepts and principles include the accrual basis of accounting, the matching principle, the revenue recognition principle, the going concern assumption, the consistency principle, the materiality concept, the cost concept, the full disclosure principle, and the objectivity concept. How does the accrual basis of accounting work? The accrual basis of accounting recognizes revenues and expenses in the period incurred, regardless of when cash is received or paid. This means that a company records transactions in the period they occur, rather than when payment is made or received. How does the matching principle function in accounting? The matching principle states that all costs associated with the generation of revenue should be recorded in the same period as when the revenue is earned. This allows companies to more accurately measure their performance and profitability by matching their associated expenses with the revenues generated from them. What is the purpose of going concern assumption? The going concern assumption states that a business will remain in operation for the foreseeable future. This means that a company does not need to liquidate its assets and settle its accounts immediately, as it has every intention of continuing to operate as normal. What is the materiality concept? The materiality concept states that transactions and events must be reported if they are material, meaning they have a significant effect on the financial statements of a business. This means that companies must disclose all information relevant to their financial statements in order to provide an accurate picture of their performance. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.