What is the interest of accounting principles?
Why accounting principles? What objectives?
Accounting principles are standards to be respected in bookkeeping to produce sincere documents on the situation of a company.
The bookkeeping must be done in accordance with accounting principles. These principles all converge towards the establishment of accounting documents reflecting a faithful image of the situation of a company. It is an essential objective for the leaders of a company to ensure the smooth running of business. The objective of the accounting principles also affects the readers of the summary statements who may be potential investors, as well as the State to ensure the accuracy of the tax amounts paid to it.
What are the Moroccan accounting principles?
Accounting principles constitute standards in accordance with which accounting must be established.
Moroccan accounting is governed by the general code of accounting standardization (CGNC) which cited a number of principles to be respected when keeping a company's accounts. These principles all tend towards the presentation of accounting documents reflecting a real and faithful image of the company, especially in the patrimonial and financial aspect. These principles are seven in number:
The principle of going concern.
The principle of permanence of methods.
The principle of historical cost.
The principle of specialization of exercises.
The precautionary principle.
The principle of clarity.
The principle of materiality.
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The principle of continuity of operation:
According to the principle of continuity of operation, the company must draw up its financial statements, known as summary statements, with a view to the normal continuation of its activities. Consequently, in the absence of any indication to the contrary, it is deemed to prepare its financial statements without the intention or the obligation to go into liquidation or to significantly reduce the scope of its activities.
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The principle of permanence of methods:
The company draws up its summary statements by applying the same valuation rules from one financial year to another. It can only introduce changes in its evaluation methods in exceptional cases.
The changes made to the usual rules must be justified in the additional information statements (ETIC) by justifying and specifying their impact on the assets and/or on the financial situation of the company.
The historical cost principle:
By virtue of the principle of historical cost, the entry value of an item recorded in the accounts for its amount expressed in current monetary units on the date of entry remains intangible regardless of the subsequent evolution of the purchasing power of the currency or current value of the item, subject to the application of the principle of prudence.
The principle of specialization of exercises:
Expenses or income relating to the financial year but known after the closing date and before that of the establishment of the summary statements must be recorded among the expenses or income of the financial year which actually concerns them.
Expenses or income recorded during the financial year and relating to subsequent financial years must be subtracted from the elements of the result of the current financial year and recorded in an adjustment account.
The precautionary principle:
By virtue of the principle of prudence, the present uncertainties likely to lead to an increase in expenses or a reduction in income for the financial year must be taken into account in the calculation of the result for this financial year.
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In application of this principle, income is only taken into account if it is certain and realized at the end of the financial year. On the other hand, the charges are to be taken into account when they are probable.
The Principle of Clarity:
The principle of clarity or non-compensation is a principle by virtue of which the accounting operations must be recorded separately without netting either between the accounts of the balance sheet or those of the income statement, even if these operations are closely linked. It is the prohibition to offset a charge by a product or an asset by a liability. This is part of presenting a faithful image of the company's activity
The materiality principle:
According to the principle of materiality, the summary statements must reveal all the elements whose importance may affect the assessments and decisions.
Any information likely to influence the opinion that readers of the summary statements may have on the assets, financial situation and results of the company is significant.
This principle essentially finds its application in matters of valuation and in terms of the presentation of summary statements.