大学会计英语课件陈庆柏 主编978 7 81134 917 7unit 5.ppt

5.2 Accounting Principles Cost-Benefit Principle Accounting systems vary in complexity from the crude records kept to satisfy government authorities to the sophisticated budgeting and feedback schemes that are at the heart of management planning and controlling. As a system is changed, its potential benefits should exceed its additional costs. Often, the benefits are difficult to measure but this cost-benefit criterion at least implicitly underlies the decisions about the design of accounting systems. 5.2 Accounting Principles Prudence Convention/Principle When a choice has to be made regarding asset values, liability values or estimated expenses, the accountant will always choose that value which shows the organization or the firm in the least favorable light. This convention of caution, conservatism and prudence ensures that the true and fair views which the accountants should present do not overstate the well-being of the firm and thus mislead investors or others dealing with it. For example, stock should always be valued at cost or net realizable value, whichever is the lower, thus ensuring that it does not appear at an unrealistically high value in the balance sheet. 5.2 Accounting Principles Consistency Convention/Principle That means once an accountancy policy has been established by an organization it should be used consistently unless there is a good reason for a change. For example, the method of depreciation chosen by a firm should not be changed frequently but should be used consistently. 5.2 Accounting Principles Marking to Market Principle That means recording assets and liabilities on the company’s financial statements at current market value. This principle is supported by some accounting experts, because a chosen monetary unit, such as the dollar, is not stable in value. Its purchasing power often changes with inflation rate. 5.2 Accounting Principles Cost Recovery Principle Cost recovery is an accounting principle or concept in which asset