Discuss the
importance of GAAPs in the accounting
system.
Answers
Answer:
Generally Accepted Accounting Principles (GAAP) are basic accounting principles and guidelines which provide the framework for more detailed and comprehensive accounting rules, standards and other industry-specific accounting practices.
Explanation:
In India, financial statements are prepared on the basis of accounting standards issued by the Institute of Chartered Accountants of India (ICAI) and the law laid down in the respective applicable acts (for example, Schedule III to Companies Act, 2013 should be compulsorily followed by all companies).
The ICAI also releases guidance notes from time to time on various topics to help in the accounting process and provide clarity.
While the basic accounting principles may not directly form part of the accounting standards and the related laws, they are assumed and expected to be universally followed.