Accounting is an integral part of running a business. Some owners may do it on their own while most hire professionals for accounting & bookkeeping in Saskatchewan. Every accounting activity is based on some basic principles that also govern the provincial accounting standards, rules and procedures. No matter which industry your business belongs to, it should comply with the accounting principles. In this blog, let’s check out the five most common accounting principles that help businesses run smoothly.
1. The entity principle
Your business accounts should reflect the accounting details of your business alone. You shouldn’t link any other expenditures such as personal or a different organization with your business. Let’s say you run a business A, B and C. So, keep the accounts of each business separate from any other expense. Do not include any personal assets on the balance sheet of your business. Avoid including personal expenditures while recording business expenses. This also helps prevent controversial financial statements during tax filing in Saskatchewan.
2. The time period principle
According to this principle, business transactions should be recorded throughout specific time periods. These periods are also known as fiscal periods. Accountants in Saskatchewan recommend business owners to allot every translation to specific fiscal periods. These periods of time are of equal length. These play a crucial role when accountants evaluate and measure the financial progress of their business. If a transaction covers several periods, it should be split accordingly.
3. The consistency principle
Businesses need to choose an accounting method before they start working on the accounts. The consistency principle suggests that a business should stick to the preferred accounting method for all kinds of business transactions. The accountants must enter the transactions and present them in the same format or method. In the case of any changes in the adopted accounting method, you should explain in detail the change in your financial statement. This principle prevents people from manipulating figures on accounts.
4. The measurement principle
This principle suggests that accountants should record accounting transactions on a reasonable basis. They should take factors such as assets, revenue, liability and expenses into consideration while accounting for transactions. The most reasonable measurement in accounting and bookkeeping in Saskatchewan is the original cost. The price is mentioned on the source document based on which transactions are recorded in your business accounts.
5. Objectivity principle
According to the objectivity principle, owners must record the transactions based on objective evidence. It doesn’t matter how many people look at the records. It can be your investors, shareholders or business partners. The objectivity principle suggests they should come to the same values as mentioned in the transaction. You cannot enter records based on personal feelings or opinions but on fact.
Abiding by all the principles is quite difficult, especially when you already have a lot on your plate as a business owner. Thus, most owners resort to professionals who can help them with accounting in Saskatchewan so they can focus on other important responsibilities.