There are four basic accounting, and four basic principles of accounting and the four major constraints accounting, making a generally accepted accounting principles, or GAAP, the US GAAP are the accounting rules where companies record and report financial results and loss for the accounting period. These rules are set by the Financial Accounting Standards Board, usually in conjunction with other authorities. Auditors are not necessarily required to follow the rules, but the rules should be followed as closely as possible as they set standards that should be met to ensure appropriate accounting functionality, understandability and comparability of accounting for different companies. Below is a list of four major accounting and a brief description of each one.

1. Cost Principle

Companies need to take and report assets based on actual costs incurred to buy them rather then free-market value of the assets themselves. The idea behind this principle is that this method of recording and reporting is reliable and reduces the chance for factors such as biased market disturbing accounts. However, this method can be viewed as irrelevant as it relates to the real value of assets.

2. accrual Principle

Companies need to take and report income at the time it is earned and realized the business, but not when the money for the income received by the company . This method is known as accrual accounting. The purpose of this rule is to really show what work has been completed and what not to do in the future.

3. The Closed Principle

This rule allows for real-time analysis of costs and revenues. With this law will show how well the company has done financially and how effective it was. Anything like accrual philosophy, spending in this case can only be recorded and reported when revenue is that such charges are related was earned.

4. The Disclosure Principle

accounting firm shall be published so that the judgment of financial business can be easily done. However, disclosure of accounting and financial information should not cause the company to collect unreasonable fees or have false beliefs.