Cloud Accounting Toronto: What are the Accounting Principles?

Every business must keep the basic accounting principles in mind to ensure that they always get the most accurate financial position. All clients and stakeholders trust and rely on you to keep records and maintain certifications that enable the success of the business. Even with cloud accounting Toronto, the below principles must be observed.

Revenue Recognition

This refers to the period when revenue is recognized in the company's income statement. If your system works on a cash basis, then revenue should be recognized in the same period the cash received. If you use the accrual method, then revenue should only be realized when the service was provided.

Cost Principle

A company should always record its equity, liabilities, and assets at the original cost at which they were bought or sold. The real value of the factors changes over time due to depreciation and inflation but is not reflected during reporting.

Conservatism Principle

In the event that there are two acceptable solutions during reporting of a particular item, the accountant in charge should choose the safer option and go with the less favorable outcome. This shields the company against a future loss instead of a future gain.

Consistency Principle

This principle requires that once a business chooses a specific principle or accounting method, such as cloud accounting Toronto, they should stick to it all through. This ensures traceability and uniformity in accounting records throughout different financial years.

Going Concern Principle

This principle assumes the existence of the company will continue into the foreseeable future and not to liquidate. This gives room for a business to defer accrued or prepaid expenses into future accounting periods instead of recognizing all of them in the same period.

A growing business can significantly benefit from using cloud accounting Toronto software. This makes it easy for you to generate and issue financial reports as and when required. It also helps you make decisions that affect the continuity and success of the business.