There are two principal rules which stem directly from the prudence principle:
(i) Accountants should not anticipate income and should provide for all possible losses.
(ii) When there are many alternative values of an asset, an accountant should choose the method which leads to the lesser value.

It is assumed that accounting policies are consistent from one period to another. This adds the virtue of comparability to accounting data. If comparability is lost, the relevance of accounting data for users' judgement and decision making is gone. It makes the consistency principle important. The realisation concept states that no revenue should be recognised unless it has been realised. The prudence principle puts a further brake on it. It is not prudent to record unrealised gain but it is desirable to guard against all possible losses. Conservatism can be a useful tool in situations of uncertainty and doubt, but the abuse of this principle can definitely lead to misleading and incorrect financial statements.

According to this principle, financial statements should be prepared on the same basis as that of the proceeding period. This provides comparability to accounting data of the same enterprise over the periods or data of different enterprises of the same period or both. Whatever may be the accounting policies; these are to be followed consistently. Whenever there is any change in policy, the results of the enterprise and financial position may be affected. Therefore, nature and effect of such change and the justification of the change must be informed to the users of accounting information by way of foot-notes. Following are the examples of such changes:
(i)Change in the method of valuation of stock.
(ii) Change in the method of providing depreciation.
(iii) Change in the basis of making provision for bad and doubtful debts.

(i) According to this concept, it is assumed that the business enterprise is a continuing one and not on the verge of closure.
(ii) Business transactions are recorded and the valuation of assets used in the business is based on this assumption. When assets are purchased, these are recorded at the original cost. At the end of the accounting year, assets are valued keeping in mind the estimated future benefits and not the market value.
As a common practice, assets are valued at original cost less depreciation. Annual depreciation is charged on the basis of the useful life of the asset. For example, machinery is purchased for Rs 25,000 and it will benefit the business for 5 years. For the purpose of calculating net profits, the cost of this machine shall be spread over the 5 years. Thus, annual depreciation will be charged Rs 5,000 per annum and value of the machinery shall be shown Rs 20,000 at the end of 1st year, Rs 15,000 at the end of 2^nd year, and so on. Showing the value of an asset at cost less depreciation, is possible only because the business enterprise continues to function.

Accounting principles are guidelines which guide the accountants. These are described as concepts, conventions, assumptions, postulates, etc. These are also called 'Generally Accepted Accounting Principles' (GAAP). The American Institute of Certified Public Accountants (AlCPA) has defined the accounting principles as "a general law, or rule adopted or professed as a guide to action, a settled ground or basis of conduct or practice." In simple words, Generally Accepted Accounting Principles are the set of rules and practices that are followed by accounting professionals while recording transactions, preparing financial statements and reporting financial information.

(i) Business Entity Concept: According to this concept, the business is treated as a unit separate and distinct from the proprietor. Allthe transactions of the business are recorded in the books of the business (though they belong to the proprietor) from the point of view of the business as an entity. Even the proprietor is treated as a creditor to the extent of his capital. Capital is, thus, a liability like any other liability although the amount is not owing to any outsider. Therefore, whenever business receives cash from the proprietor, following journal entry is passed:
Cash A/c             Dr.
       To Capital A/c
Similarly, whenever proprietor withdraws some cash (or goods) from the business, following journal entry is passed to decrease the claims of proprietor:
Drawings/Capital A/c Dr.
     To Cash/Purchases A/c
(ii) Principle of Consistency: In order to enable the management to draw important conclusions regarding the working of a company over a number of years, it is essential that accounting practices and methods remain unchanged from one accounting period to another. The comparison of the accounting period with that in the past is possible only when the principle of consistency is adhered to. The principle of consistency plays its role particularly when alternative accounting method is equally acceptable. For example, in applying the principle 'that fixed asset is depreciated over its useful life' a company may adopt any of the several methods of depreciation, viz. written-down value method, straight line method, sum-of-years digit method, unit-of-production method or any other method. But in keeping with the principle of consistency, it is expected that the company would consistently follow the same method of depreciation which is once chosen. Any change from one method to another would result in inconsistency. Similarly, making the provision for doubtful debts on the percentage of sales basis in one year and change of basis in another year will result in inconsistency.

Money Measurement Concept: Money measurement concept means that only those transactions which can be expressed in terms of money are recorded in the books of accounts. It means that transaction and facts, which cannot be expressed in terms of money, will not be recorded. For example, general health condition of the managing director, working conditions, sales policy, industrial relations, quality of the products etc. are very useful facts of the business but are not shown in the books of accounts because these cannot be expressed in terms of money. This concept restricts the scope of accounting to the information which can be expressed in terms of money. In this way, the scope of personal judgement and bias is restricted. Further, this concept makes accounting data homogenous and helps in understanding the affairs of the business.

(i) Dual Aspect: According to Dual Aspect principle every business transaction has two aspects, i.e., debit and credit with same amount. e.g., Rent paid Rs 1,000. So this transaction has two aspect one is debit as rent and other is cash which will be credit. Trial Balance is also prepared as per the Dual Aspect principle.
(ii) Accrual: According to this principle, all anticipated losses and expenses should be recorded in the books of accounts, but all anticipated gains should be ignored.
(iii)Conservatism: It is also called Prudence Principle. Conservatism principle says that provide for all possible anticipated losses but not for profits. But the biggest drawback of this principle is creation of secret reserve. For example: Creation of Provision for doubtful debts.

(i) Money measurement concept: Restricts the scope of accounting to factors that are measurable in terms of money. It says only the transactions measurable in terms of money are to be recorded. While we can record values of various assets and liabilities, we cannot record the. level of satisfaction of our customers and loyalty of our employees. We can say our customers are 'happy' or 'very happy', but we cannot write in our accounts how much our customers are happy, simply because 'happiness' cannot be measured in terms of money.
(ii) Principle of Full Disclosure: This principle implies that the accounting report should be full and accurate. If there is any material fact which can affect the profitability of the business in future, it must disclose it to the users whether it is legally required or not. There are standard forms for Balance Sheet, Notes to Accounts for Balance Sheet and Profit & Loss Account. It is a legal requirement for joint stock companies to present information in the standardized form.
(iv) Dual Aspect Principle: This principle is the backbone of accounting. Every business transaction affects at least two aspects in a business. When we buy goods, we get goods and pay cash. When we sell goods we give goods and get cash. Accounting is much more than just buying and selling. Dual aspects is involved in every transaction and event which gives rise to the basic accounting equation, Equity + Liabilities = Assets.

(i) Accounting Standards: Accounting Standards are the guidelines for financial accounting, such as, how a firm prepares and presents its business income, expenses, assets and liabilities. The main purpose of accounting standards is to promote a better understanding of financial statements.
(ii) Matching Concept: The matching principle is one of the basic underlying guidelines in accounting. The main purpose of the principle is to direct a company to report an expense on its income statement in the same period as the related revenues. Matching concept also requires the application of Personal Judgments in making the estimates for Doubtful debts, discount etc.
(iii) Going Concern Assumption: This concept assumes that every business has a long and indefinite life. Since financial statements are prepared on the basis of this concept, all fixed assets are shown in the books at their cost ignoring their market value.