CHARACTERISTICS OF ACCOUNTING PRINCIPLES

(1) OBJECTIVITY:-A principle is objective to the extent that the accounting information is not influenced by the personal bias of those who furnish the information.
(2) RELEVANCE:-A principle is relevant to the extent that it results in information that is useful to those who want to know something about certain business.
(3) FEASIBILITY:-A principle is feasible to the extent that it can be applied without undue complexity or cost
(4) APPLICABILITY:-A principle is regarded as goods,if its application is possible.If a principle is theoretically sound, but its application is difficult, then the principle has no value.
(5) SIMPLICITY:-If a principle is simple,it should command popularity.Hence the principle should have simplicity

ACCOUNTING PRINCIPLES

Accounting is a language of business to be communicated to all users irrespective of their status or nationality.
         A principle is a statement which reflects the fundamental truth about some phenomena.It tells what results are expected when the principle is applied.In other words, the term "principle" means rule of action or conduct.It is defined as a guidance to actions, a settled ground or basis of conduct or practice .Hence  accounting principles serves as a explanation of current practices and as a guide for the selections of conventions or procedures where alternative exists

ACCOUNTING EQUATION

An accounting equation is a statement showing the equality between debits and credits or assets and liabilities including capital. so,
assets=equities
The resources or properties owned by a business are assets.But equity represents the total claims against assets of the business.Equities relates to creditors equity and owners equity.Creditors equity or liability is the debts of the business to outsiders .But owners equity or capital is the owner's claim against business.
HENCE,
ASSETS=LIABILITIES + CAPITAL(ie:-A=L+C)
THE ABOVE EQUATION CAN BE ALSO BE EXPRESSED AS GIVEN BELOW.

ASSETS - LIABILITIES=CAPITAL
ASSETS - CAPITAL =LIABILITIES
ASSETS - CAPITAL - LIABILITIES=ZERO

EXPENDITURE

Expenditure is the amount of resources consumed.It is classified into capital expenditure and revenue expenditure.
CAPITAL EXPENDITURE:-
Expenditure incurred for deriving long-term benefits for the business is capital expenditure.Expenditure incurred for purchase of  fixed assets such as plant&machinery,goodwill,patent etc. and expenditure incurred for raising long-term capital are examples of capital expenditure.
REVENUE EXPENDITURE:-
Expenditure incurred merely to maintain the business and to keep the assets in good working condition is termed as revenue expenditure.Payment of salaries and wages,rent,telephone charges ,depreciation etc are examples of such expenditure

REVENUES&EXPENSES

Revenues
Incomes derived by the business from its normal activities(or activities incidental to to the main activities) are called revenues.Sales proceeds fees, commission,royalty,rent,interest and dividend are some examples of revenues.
Expenses
Amounts spent for services obtained or cost of resources consumed to earn profit are known as expenses.Salaries,rent,printing and stationary , wages and depreciation are some examples of expenses

ASSETS

Assets are things of value at the command of business.They fetch cash or other benefits in future.Land and building,plant&machinery, furniture&fixtures,stock,cash in hand and cash at bank are some of the examples of assets.Assets can be classified into (a) current assets,(b) fixed assets.
(a)CURRENT ASSETS:-Assets which are held for a short period are known as current assets or floating assets.Such assets acquired with the intention of converting them into cash or consuming them during the operating cycle of business.Cash in hand and at bank,debtors,bills receivable,and stock are some of the examples of current assets.
(b)FIXED ASSETS:-Assets which are acquired for a relatively longer period are known as fixed assets.Land&building and plant and machinery are some examples of  fixed assets.Fixed assets are brought into the following categories.
    (1)TANGIBLE ASSETS
                   Assets having definite shape and material existence are known as tangible assets.Land&building,furniture and fixtures,plant&machinery are some examples.
    (2)INTANGIBLE ASSETS
                  Assets having no shape and physical existence are known as intangible assets.Goodwill,copyright and patent are examples.
    (3)WASTING ASSETS
                 Assets which get exhausted to the extent of extraction are called wasting assets.Natural resources like mines,quarries and oil fields are examples.
    (4)FICTITIOUS ASSETS
                Assets which have no real value but are shown in the books of accounts only are called fictitious assets.Preliminary expenses,discount on issue of shares and debentures and under writing commission are some examples of fictitious assets.

LIABILITIES

Liabilities denote the amounts which a firm owes to others in future.They are the proprietors or creditors claim against the assets of the firm.Liabilities can be categorized into (a) short-term liabilities,(b) long-term liabilities.
(a)SHORT-TERM LIABILITIES
     Liabilities which become due or payable within a year are known as current liabilities or short-term liabilities.Creditors of goods,bills payable and outstanding expenses are some of the examples of current liabilities.They are usually paid out of current assets.
(b)LONG-TERM LIABILITIES
    Liabilities which are payable after period of one year are known as fixed or long-term liabilities.
debentures and mortgage loans are some of the examples of long-term liabilities.