Accounting theories give an idea of how to do it, how to follow it and the corresponding methodology, therefore the owner of a company must recognize these accounting theories to comply within the company.
We have the following accounting theories:
Comparable: It must be presented in a way, which may be compared thoroughly. Such as sales increased by way of 10% from the closing yr.
Relevant: Accounting information ought to be relevant; such as contemporary yr’s records with relevant facts have to be presented in economic report.
Consistent: Methods applied in accounting ought to be consistent; assume immediately line technique of charging depreciation is accompanied since last 5 years. If such technique is converting heavily, like instantly-line for this year and double declining technique inside the coming yr, then the system isn't regular and it doesn’t indicate smooth accounting.
Reliable: There should be reliability; such as coins bills are supported by way of respective vouchers of coins disbursements.