Convention Used in Modern Systems of Accounting
| ACCOUNTING PRINCIPLES | | | Meaning of Accounting Principle | |
Principle means a general law or rule adopted or professed as a guide to action ‘a settled ground or a basis of conduct or practice’. The word ‘Principle’ when applied in accounting may have different meanings in different contexts. It is not used in the sense of a fundamental accounting truth – it connotes a guiding influence or an accepted rule of action or conduct.
Accounting principles have been defined as the body of doctrine, commonly associated with the theory and procedure of accounting, serving as an explanation of current practices and as a guide for the selection of conventions or procedures where alternative exist.
In simple words, ‘Accounting Principles’ may be defined as those rules of conduct or procedure which are adopted by the accountants universally for recording and reporting of financial data. These principles bring about uniformity in the practice of accounting. | | Generally Accepted Accounting Principles (GAAP) | | Accounting is a practical activity. Historically, the accounting professionals have not been very much concerned about the theoretical base of their profession. But gradually their job has been regarded as supplier of financial information for use by the economic decision makers. With the growth in business and financial activities, this job of an accountant is being put under scrutiny. They have to satisfy all the users of their financial statements. They have to apply certain concepts, conventions and postulates while preparing and presenting accounting information for the assistance of decision makers. The consensus view of the persons engaged in the accounting profession relating to:
a. which economic resources and obligations should be recorded as assets and liabilities in financial accounting,
b. which changes in assets and liabilities should be recorded,
c. when these changes should be recorded,
d. how the assets and
Principle means a general law or rule adopted or professed as a guide to action ‘a settled ground or a basis of conduct or practice’. The word ‘Principle’ when applied in accounting may have different meanings in different contexts. It is not used in the sense of a fundamental accounting truth – it connotes a guiding influence or an accepted rule of action or conduct.
Accounting principles have been defined as the body of doctrine, commonly associated with the theory and procedure of accounting, serving as an explanation of current practices and as a guide for the selection of conventions or procedures where alternative exist.
In simple words, ‘Accounting Principles’ may be defined as those rules of conduct or procedure which are adopted by the accountants universally for recording and reporting of financial data. These principles bring about uniformity in the practice of accounting. | | Generally Accepted Accounting Principles (GAAP) | | Accounting is a practical activity. Historically, the accounting professionals have not been very much concerned about the theoretical base of their profession. But gradually their job has been regarded as supplier of financial information for use by the economic decision makers. With the growth in business and financial activities, this job of an accountant is being put under scrutiny. They have to satisfy all the users of their financial statements. They have to apply certain concepts, conventions and postulates while preparing and presenting accounting information for the assistance of decision makers. The consensus view of the persons engaged in the accounting profession relating to:
a. which economic resources and obligations should be recorded as assets and liabilities in financial accounting,
b. which changes in assets and liabilities should be recorded,
c. when these changes should be recorded,
d. how the assets and