Question

15.1 DESCRIPTIVE QUESTIONS [15 MARKS]
1. What do you mean by an accounting principle ? Why are they important?
[A
Define the Entity Concent What is its affont​

Answer 1

Answer:

here is your answer

Explanation:

Accounting principles are important because they establish a consistency that allows for more accurate and efficient viewing of company statements and reports.

Answer 2

Answer:

Accounting principles are the general rules and guidelines that companies are required to follow when reporting all accounts and financial data.

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Whilst there is currently no universally standardised accepted accounting principles, there are various accounting frameworks which set the standard body. The most common accounting principle frameworks used are IFRS, UK GAAP, and US GAAP. There are both similarities and differences between these three frameworks, where GAAP is more rule-based whilst IFRS is more principle based

Why are accounting principles important?

The purpose of having - and following - accounting principles is to be able to communicate economic information in a language that is acceptable and understandable from one business to another. Companies that release their financial information to the public are required to follow these principles in preparation of their statements.

Depending on the characteristics of a company or entity, the company law and other regulations determine which accounting principles they are required to apply. The standard accounting principles are collectively known as Generally Accepted Accounting Principles (GAAP). GAAP provides the framework foundation of accounting standards, concepts, objectives and conventions for companies, serving as a guide of how to prepare and present financial statements.

2nd

The concept of business entity assumes that business has a distinct and separate entity from its owners. It means that for the purposes of accounting, the business and its owners are to be treated as two separate entities.

Keeping this in view, when a person brings in some money as capital into his business, in accounting records, it is treated as liability of the business to the owner.

Here, one separate entity (owner) is assumed to be giving money to another distinct entity (business unit).

Similarly, when the owner withdraws any money from the business for his personal expenses(drawings), it is treated as reduction of the owner’s capital and consequently a reduction in the liabilities of the business.