Generally accepted accounting principles were originally principles developed through common usage and deemed acceptable if they were permitted by most professionals. The SEC is an important source of the ASB's authority. Every business is to be accounted for separately and distinctly from its owner or owners. Objectivity Principle-Financial statement information is to be supported by unbiased evidence not someone's opinion. Cost Principle-Financial statements are based on actual costs incurred in business transactions.
Cost is the cash or cash-equivalent amount given in exchange.
Revenue Recognition Principle-Revenue should be recognized at the time it is earned. The inflow of assets associated with revenue may be in a form other than cash. The amount of revenue should be measured as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services. Accounting assumes a stable monetary unit, which means we do not account for change in the value of currency. One way to judge a business's relative success is to compare its return on equity ratio to the ratios of other activities or investments.