Principles of Financial Accounting

There are several fundamental principle of financial accounting. These are: 
1) Revenue Recognition - Gives the basis of recognizing revenue
2) Matching expense with revenue  - Matching of expense to revenue. Incur expenses when you recognition revenue. 
3) Objectivity - Accounting info must be verifiable and reliable
4) Consistency - Similar accounting policies and methods for the same company should be applied consistently over time.
5) Materiality - information that is significant should be include in accounting statements
6) Conservatism - Apply prudence and use accounting methods that do not overstate assets and revenues and understate liabilities and expenses.
7) Comparability -  If companies use similar accounting standards, it is possible to compare the performance of different companies using the financial statements. 
8) Relevance - Financial statement should be relevance for decision making. 

You may be surprised that the accounting principles are often manipulated by senior executives. Companies like Take-Two (developers of Grand Theft Auto), Enron and Halliburton used to have aggressive revenue recognition policies, booking revenue advance of actual sales.