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Previously we studied about the Cost Principle GAAP , but here we are concerned with Objectivity Principle GAAP. What Does Objectivity Mean in Accounting? According To Objectivity Principle “There should be factual and definite basis for the valuation of assets”. For Example, if an entrepreneur purchased land for business use, then there should be factual and definite basis for the valuation of the cost of the land. The estimated market’s value of land is not the definite or factual value so this value is not objective, because the market’s value is constantly changing. In Accounting, Objectivity means that the information presented in Financial Statements And Reports must be free from any influence that makes it biased. There is no Conflicts of Interests which means no interested party tries to get their own benefits by influencing the information presented in Financial Statements and Financial Reporting. To do ...

Here we discuss about Cost Principle that is one of the Generally Accepted Accounting Principles (GAAP). The Cost Principle states that assets should be recorded or valued at cost initially. It does so to show historical cost of the assets at balance sheet of the business when the asset was purchased for the first time of the company history. However, t his pri nciple restricts t h e compa ny to s how o nly  origi nal cost . So, for a compa ny  it does not mean that a compa ny always follows  t his pri nciple of GAAP  a nd  s hows   assets at cost o nly .  The Entrepreneur may record assets at other than  historical  cost to show on balance sheet. According To Cost Principle, the cost value will become the basis for the valuation of the assets. For Example, if the market value of the asset is increased or decreased, then the assets can be revalued at the market value. For Example if a busine...

Here we discuss about the difference between Expense Recognition Principle and Matching Principle and both of these principles are included in Generally Accepted Accounting Principles (GAAP). Expense Recognition Principle states that expenses should be recorded when incurred whether the cash is paid or not. Matching Principles states that all the expenses incurred for generating revenue must be matched with that particular revenue. Because in Expense Recognition Principle we record the expenses when these are incurred whether the cash is paid or not i.e., it also involves a Credit Transaction alongwith a Cash Transaction, therefore, we focus only on the recording of expenses. For Example, Rent paid for Rs.5000 on Account are recognized as expense whether the cash is paid or not. While in Matching Principles, we set off the revenues with the expenses incurred for earning that revenue. For Example, On 1 st March, 2017 Rent Paid For Rs.5000 on Account...