fundamental accounting principles answers

but at the core, the fundamentals and objective of accounting principles remain the same.

The regulators and authorities of each country may have their own accounting principles like UK GAAP, USA GAAP, IFRS etc. The accounting principles are commonly referred to as ‘Generally Accepted Accounting Principles (GAAP).Īccounting principles helps to bring the uniformity in accounting and preparing financial statements and it is followed worldwide. Accounting principles are the foundational guidelines for recording and preparing financial statements. What is Accounting Principle?Īccounting principle refers to common rules or guidelines for accounting financial transactions and preparing financial statements. Here is why Accounting principles helps to bridge the gap and aims to bring some level of uniformity in financial reporting. As a result, financial data becomes unusable. This becomes practically impossible for a business compare and read the other companies’ statements. Now imagine, if each business prepares the financial statement in their own way, we all will have hundreds of thousands of financial statements formats trying to convey the same information. These financial statements are used by both internal stakeholders as well as external like investors, tax authorities, regulators, banks etc. By recording all the financial transaction, accounting helps in determining the financial performance of the business by preparing financial statements. With modern day business requirements, business and accounting are simply inseparable.

Accounting is an integral part of every business regardless of business size.

Fundamental accounting principles answers