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Generally Accepted Accounting Principles

In: Business and Management

Submitted By sidmul
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CHAPTER

2
Generally Accepted
Accounting Principles

Introduction
Need of Accounting Principles
Generally Accepted Accounting Principles
Characteristics of Accounting Principles
Objectivity
Application
Reliability
Feasibility
Understandability
Accounting Concepts
Separate Entity Concept
Money Measurement Concept
Dual Aspect Concept
Going Concern Concept
Cost Concept
Period
Accounting Period Concept
Periodic Matching of Costs and Revenues Concept
Realisation Concept
Accounting Conventions
Conservatism
Consistency
Materiality
Full Disclosure
Your
Check Your Understanding
Descriptive Questions
Interview Questions

Accounting for Managers

24

2.1 INTRODUCTION
Accounting is the language of business. When we speak in any language, our intention is our ideas are to be understood by others. Language can be understood only when words used by us convey the same meaning to the listener. Both the speaker and listener should mean the same for the words used. Equally, every language has grammar of its own. When we write or speak, we follow the principles of grammar. Similar is the case with accounting.
Most of the activities, be it official, social or personal, are guided by a set of certain rules or conventions. Some of the conventions are as follows:

In India, we always drive on the left hand side of the road.

Overtaking the vehicle, either two-wheeler or four-wheeler, is to be made on the right side, alone.

As a citizen of India, we are guided by certain rules and regulations.

Also as a citizen, we are supposed to obey the law of this country and so on.
While preparing the accounts, the accountant is often faced with the problem as to how exactly a transaction or event is to be recorded in the books of accounts and shown in the Profit and
Loss account and Balance Sheet. There are differences of views on many

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