Main Principles of Accounting: 

1. The Business Entity Concept: According to this concept, a business firm is treated as a unit separate and distinct from its owners. A completely separate set of books is kept for the firm and business transactions are recorded from the firm’s point of view. The capital provided by the owner is treated as a liability of the firm. Interest on capital is treated as an expense of business. Similarly, the money/goods withdrawn by the proprietor from the firm for his personal use is treated as drawings. The concept of separate entity is necessary for ascertaining the true net profits and financial position of a business firm. 

2. The Going Concern Concept: It is assumed that the business will continue to exist for a long time in the future. Transactions are recorded on the assumption that the business will exist for an indefinite period of time. It is on this assumption that a distinction is made between capital expenditure and revenue expenditure. Fixed assets are recorded at their original cost less depreciation. Market value of fixed assets is not recorded, as these assets are not to be sold in the near future. 

3. Accounting Period Concept: It is due to this concept that financial statements are prepared at regular intervals, generally one year. This period is called accounting period. The net profit/net loss of business is ascertained separately for each accounting period. 

4. Money Measurement Concept: On the basis of this concept, only those transactions are recorded in accounts which can be expressed in terms of money. For example, the retirement of the chairman of the company cannot be recorded because it is not possible to measure the monetary effect of retirement except in terms of gratuity and other benefits payable to the chairman. 

5. The Matching Principle: According to this principle, cost of a particular period should be charged from the revenue of same period only. Only such matching of cost and revenue can reveal the true profit or loss for a period. When cost is associated with a particular product or service, revenue earned from that product or service should be matched to its cost. This principle provides the guidelines as to how the expenses are to be matched with revenue. It requires that in determining the net profit, all costs which are applicable to revenue of that period should be charged against that revenue.