Nature and Meaning of Accounting Principle.

There is ample confusion and controversy as to the meaning and nature of accounting
principle. There is a school of thought which believes that the term “principle” connotes
“fundamental belief” or a “general truth” and as such it is incorrect to use this term with
reference to accounting because accounting, merely as an art, is only an adoption for the
attainment of some useful and beneficial results. Adaptation, inherently, implies the changing
nature and, hence, a sharp contradiction to the meaning of the term “principle” which stands
for the “fundamental truth”.
There is another school of thought which feels that the term “principle” means only
“rule of action or conduct” and as such can be very correctly used with reference to rules used
in accounting. The American Institute of Certified Public Accountants (AICPA) has also
supported the use of the word “principle” in the sense in which it means “rule of action”. It
has defined the principle as “a general law or rule adopted or professed as a guide to action; a
settled ground or basis of conduct or practice.” Pato and Littleton, in order to avoid the
confusion as to the meaning of the term “principle”, have purposely used a new term
“standards” in place of “principle”. ‘Principles’ would generally suggest a universality and a
degree of permanence which cannot exist in a human service institution such as accounting.”