What is golden rules in acciunting?

Question

Accepted Answer

Golden rules in accounting are basic principles that guide the recording of financial transactions.

The first golden rule is the accounting equation, which states that assets must always equal liabilities plus equity.
The second golden rule is the revenue recognition principle, which states that revenue should be recognized when it is earned, not when it is received.
The third golden rule is the matching principle, which states that expenses should be recognized in the same period as the revenue they helped to generate.
Other important golden rules include the consistency principle, the materiality principle, and the conservatism principle.
For example, if a company sells a product for $100, the revenue should be recognized when the product is delivered, even if the customer has not yet paid.
Similarly, if a company incurs $50 in expenses to produce the product, those expenses should be recognized in the same period as the revenue.
Consistency means that a company should use the same accounting methods and principles from one period to the next, while materiality means that only significant transactions need to be recorded.
Finally, conservatism means that a company should err on the side of caution when recording transactions, such as by recognizing losses immediately but delaying gains.

Accepted Answer

Real nominal personal

Top KPMG Global Services Audit Associate interview questions & answers