Advertisements
Advertisements
प्रश्न
Explain the need for GAAP for accounting.
Why are accounting principles necessary for GAAP?
उत्तर
Need for GAAP in Accounting:
- Consistency: GAAP ensures consistent guidelines and standards are followed when recording, summarising, and reporting financial transactions. Ensuring the consistent application of GAAP is crucial for preparing financial statements using standardised methods and principles. This promotes comparability across various time periods and companies.
- Transparency: Following GAAP guidelines, companies are obligated to provide thorough and pertinent information in their financial statements, ensuring transparency and disclosure. This level of transparency allows investors, creditors, regulators, and other stakeholders to gain a clear understanding of the entity's financial position, performance, and risks. This, in turn, empowers them to make well-informed decisions.
- Reliability: GAAP places a strong emphasis on the use of accurate and unbiased measures for recording and reporting financial information. By following GAAP, companies can strengthen the credibility and reliability of their financial statements, minimising the potential for manipulation, fraud, or misrepresentation.
- Compliance: GAAP is essential for maintaining compliance with the necessary legal and regulatory standards that govern financial reporting. Companies that adhere to GAAP guidelines showcase their commitment to following accounting standards and regulations, which helps minimise the risk of penalties, sanctions, or legal disputes.
संबंधित प्रश्न
Accounting principles are necessary due to which of the following reasons?
According to this principle, revenue is deemed to be realised when the goods have been transferred or the services have been rendered to a customer.
What is business entity concept of accounting?
Name the basic principles of accounting.
With reference to the concept of accounting only those transactions are recorded in accounts which can be expressed in terms of money. Justify either for or against.
"The capital provided by the owner is treated as a liability of the firm." Explain the concept on which the above depends.
"Fixed assets should be valued at the market price." Comment.
Explain the money measurement principle of accounting.
Explain the principle of consistency.
Name any four concepts of GAAP.
