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Accounting is a language of the business. Accounting Financial statements prepared by the accountant, to communicate financial information to the various stakeholders for decision-making purpose. Thereby it becomes important that financial statements prepared by different organizations should be prepared on a uniform basis.
Apart from this, there should also be consistency over a period of time in the preparation of these financial statements. If everyone starts following their own norms and notions for accounting of different items then there will be utter confusion.
To avoid the chaos and achieve uniformity, accounting process is applied within the conceptual framework of ‘Generally Accepted Accounting Principles’ (GAAPs). These principles are the ground rules, which decide the parameters and constraints within which accounting reports are generated. Principles of Accounting are basic norms and assumptions on which the whole accounting system has been developed and established.
Principles of Accounting are a body of doctrines commonly associated with the theory and procedures of accounting serving as an explanation of current practices and as a tool for the selection of conventions or procedures where alternatives exist.”
Accounting principles must satisfy the following conditions
Accounting conventions emerge out of Accounting practices also known as Accounting Principles. These conventions are derived by usage and practice. The accountancy bodies of the world may change any of the conventions to improve the quality of accounting information. Accounting conventions need not have universal application.
|Convention of Consistency||
|Convention of Conservatism||
|Convention of disclosure||
|Convention of materiality||
The widely accepted Accounting concepts can be tabulated as under :
|Money measurement concept||
Principles of Accounting are a body of doctrines commonly associated with the theory and procedures of accounting serving as an explanation of current practices and as a tool for selection of conventions or procedures where alternatives exist.”
Accounting principles must satisfy the following conditions:
|Going Concern Concept||
|Concept of dual aspect||
In the end, the aim of accounting is to keep systematic records to ascertain financial performance and financial position of an entity and to communicate the relevant financial information to the interested user groups.
The accounting financial statements are basic means through which the management of an entity makes public communication of the financial information along with selected quantitative details. And such quantitative details could well be maintained with help of ERP Systems such as Tally.ERP 9 following the Accounting Principles laid by statutory organizations.
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