Accounting Principles Based on Practicability, Subjectivity, or Objectivity

Introduction: Accounting principles refer to the guidelines and rules that help in preparing financial statements. These principles guide the accountants to record, classify, and summarize financial transactions accurately. The accounting principles can be based on practicability, subjectivity, or objectivity.

Practicability: Accounting principles based on practicability are those that are easy to apply in real-life situations. These principles are practical and convenient to use, and they ensure that the financial statements are prepared in a timely and efficient manner. The practicability principle is also known as the feasibility principle, and it requires that the accounting principles should be practical and should be applied consistently.

Subjectivity: Accounting principles based on subjectivity are those that are influenced by personal opinions, judgments, and biases. These principles are subjective as they depend on the individual's interpretation of the financial information. The subjectivity principle is also known as the discretion principle, and it allows for flexibility in accounting practices. However, the subjectivity principle can lead to inconsistencies in financial reporting if there is a lack of standardization.

Objectivity: Accounting principles based on objectivity are those that are based on facts and evidence rather than personal opinions or biases. These principles are objective as they rely on verifiable information and data. The objectivity principle is also known as the verifiability principle, and it requires that the financial statements should be based on reliable and verifiable information. The objectivity principle helps to ensure that the financial statements are accurate and reliable.

Conclusion: In conclusion, accounting principles can be based on practicability, subjectivity, or objectivity. The practicability principle ensures that the accounting principles are practical and easy to apply. The subjectivity principle allows for flexibility in accounting practices but can lead to inconsistencies. The objectivity principle ensures that the financial statements are based on verifiable information and data, making them accurate and reliable.

Practicability