Fundamental Accounting Principles You Can Apply in Your Everyday Life
Many Singaporean young people regard accounting as a boring career. They picture a typical accountant being locked up in a small office with piles of paperwork and entries to process. This image of traditional accounting implies that a career in accounting services in singapore is mundane and not connected to the dynamics of daily life. But that’s not accurate. Accounting is an exciting career and way of life. Principles of accounts are applied in everyday life and are necessary ingredients for your success.
Below are some fundamental accounting principles which you can apply in your everyday life.
The principle of Double Entry
The birth of bookkeeping brought along the double entry system of recording transactions. Its basis is straightforward, no operation occurs without affecting two parties in the deal or at least two aspects of a record. The principle of accounting is that for every debit there must be a corresponding credit. This principle applies to everyday life. You can use it in relationships or to manage and control behaviour. For instance, you can use the principle to train children on the necessity of work and in setting expenditure limits.
The Expense Recognition Principle for CreditCard Applications
The expense recognition principle defines the point in time at which the accountant records a transaction as an expense. The principle states that a business incurs an expense in its books at the instance which they receive or accept goods or services from another party. This means that companies incur expenses upon receipt of products or services, not at the time of invoicing or payment for the commodity. The expense principle is a fundamental principle of accounting and applicable in your everyday life, especially in credit card usage. Smart people apply this principle when they use their credit cards and recognise the expense at the time when they receive goods or services not when they receive their credit card bill.
The Matching Principle
The matching principle dictates that each item of revenue should have a corresponding item of expense. You can apply this principle in everyday life to modify your expenditure behaviour. You can also use this principle to manage personal finances and create sustainable systems at home or work.
The Costing Principle
Accounting service providers in Singapore within the real estate sector, employ the costing principle. They use the historical cost of an item to calculate the actual cost of the item, not the resell cost. This principle is frequently applied when people want to sell old assets such as homes. As a common life principle, you can use it in when selling your car or other valuable items. The historical cost of the commodity is the primary reference point not the current fair market value of the commodity.
The Objectivity Principle
When conducting normal everyday activities, objectivity in perceptions or decisions is seldom. Choices are often controlled by emotions but rarely on the truth and facts. However, the objectivity principles in accounting require that accountants should only use factual and verifiable data. They should not apply subjective assumptions and measurement of values in all decisions or advice. This includes instances where the actual data seems skewed or less presentable as compared to subjective data.
To conclude, these principles demonstrate that accounting is not all about sitting behind a desk and crunching numbers. Yes, it may have lots of that. However, fundamental principles mentioned above are applicable in everyday life. When appropriately applied and consistently you will grow in every aspect of your life.