ACCOUNTING CONCEPTS, PRINCIPLES AND CONVENTIONS
A widely accepted set of rules, conventions,
standards and procedures for reporting financial information, as established by
the Financial Accounting Standards
Board(FASB) are called Generally Accepted Accounting Principles (GAAP).
They are common set of accounting principles, standards and procedures that
companies/entities use to compile their financial statements.
GAAP is to be followed by companies so that investors have optimum level of
consistency in the financial statements they use when analysing companies for
investment purposes. GAAP cover such
aspects like revenue recognition, balance sheet items classification and their
valuation, treatment and presentation. Suppose we give to prepare our
accounts from five different Accountants. After some time all accountants come
with their accounts by showing different profit, since all of them followed
different accounting policies. In that case it will not serve the purpose of
accounting. So it is necessary that there should be some principle, so that all
accounts prepared by any number of accountant will show same amount of profit.
So to avoid confusion and to ensure uniformity, GAAP (Generally Accepted Accounting Principles ) are framed.
v Accounting Principles
v Accounting Concepts
v Accounting Conventions
v Basic AssumptionConcepts/Principles/Conventions
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