Principles of accounting

PRINCIPLES OF ACCOUNTING
Generally acceptable (P.C.G.A)

Accounting principles in force in Ecuador are divided into three groups.

• Basic Principles.

Are those that are considered essential because it guides the action of the accounting profession.

• Essential principles.

Are related to financial accounting in general and provide the basis for the formulation of principles.

•General principles of operation.

Are determining the registration, measurement and financial reporting.

BASIC PRINCIPLES

1. Accounting entity.

The accounting entity is the entity that develops enterprise business. The scope of financial accounting is the economic activity of the company.

2. Equity

Accounting and information must be based on the principle of equity, so that therecording of economic events and information are based on equality for all sections with no preference for any one in particular.

3. Measurement Resources

The accounting and financial reporting are based on the tangible and intangible assets that have economic value and therefore likely to be valued in monetary terms. The financial deals thus in particular, the measurement of resources andeconomic obligations and changes in them.

4. Period

The financial accounting provides information about the economic activities of a company for specific periods, which in comparison to the life of the company, are short. Typically the time periods of one year and others are the same, with the aim of making comparisons and analysis to policy making.

5. Essentially on how

Accounting andfinancial information is based on the economic reality of transactions. The financial highlights the economic substance or essence of the event, even if the legal form may differ from the economic substance and suggest different treatments.

6. Continuity between accounts.

The principles are based on the assumption of continuity of operations of the accounting entity, going concern, unlessindicated otherwise, for which techniques of recognized value, given the particular circumstances.

7. Measurement in monetary terms

The financial quantified in monetary terms, the resources, obligations and changes in them.

8. Estimates

Because it involves the financial allocations or distributions of certain items, including relatively short period of complex joint and it isnecessary to use estimates or approximations. Continuity, complexity, uncertainty and common nature of the results inherent in economic activity impossible in some cases to quantify accurately the silt areas, which is why it is necessary to use estimates.

9. Accumulation

The determination of periodic income and financial position depends on the measurement of resources and economic obligations.And their changes as they occur, rather than just limited to the records of income and cash payments.
For the determination of periodic net income and financial situation, it is imperative the record of these changes. This is the essence of accounting based on the method of accumulation.

10. Exchange rates.

Measurements of financial accounting are primarily based on prices at whichresources are exchanged and economic obligations. The measurement is based on monetary terms prirnordialrnente in the prices of exchange.

Changes in resources from various exchange activities, eg production, are measured through the allocation of previous prices of exchange, or by reference to current prices for similar resources.

11. Trial or Criterion

The estimates used in the imperative,involving greater participation by the trial or test of professional accounting.

12. Uniformity

Accounting principles should be applied consistently from one period to another. When special circumstances presented by changes in the technical principles and methods of application it shall be expressed in such a situation, while reporting on the effects they cause in the information.

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