Accounting Principles

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Prudence

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Prudence, or conservatism, is the accounting principle that drives accountants to take a conservative view of financial affairs, making provisions for bad debts without evidence of non-payment.

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Matching Principle

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The matching principle refers to matching revenues with related costs in the relevant period, ensuring expenses are accrued when costs are incurred, even if not yet invoiced.

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Deferred Income

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Deferred income is income that is invoiced in advance but only recognized in profit and loss when the product or service is delivered.

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Inventory

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Inventory is stock held on the balance sheet until it is used in the business.

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Work-in-Progress

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Work-in-progress refers to work carried out on a project that has yet to be billed, treated as a type of inventory.

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Accrual Accounting

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Accrual accounting is an accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

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Revenue Recognition Principle

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The revenue recognition principle dictates that revenue should be recognized in the accounting period in which it is earned, regardless of when payment is received.

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Asset

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An asset is a resource owned by a business that is expected to provide future economic benefits.