Why Does Financial Accounting Have To Comply With GAAP? (2)

Financial AccountingIt organizes the transactions of a company by writing down those transactions & making a financial statement or financial document that summarizes the knowledge in a balance sheet or income statement. B. To reduce the accounting alternatives in the preparation of financial statements within the bounds of nationality. C. To ensure comparability of financial statements of different enterprises with a view to provide meaningful information to various users of financial statements. E. To harmonized the diverse accounting policies and practices in use in a country and to formulate its own accounting standards and to integrate them to the extent possible. The Institute of Chartered Accountants of India (ICAI) has issued its ‘Conceptual Framework for the preparation and presentation of financial statements.’ In the year 2000.

It does not define any Accounting Standard and it does not override any specific Accounting Standard. Answer: The Companies Act 1956 was amended in the year 1999 to support the Accounting Standards in true sense. Answer: According to Modified Principles of Substance Over Legal Form, the transactions and events recorded in the books of accounts and presented in the financial statements governed by the, ‘Substance of such transactions and not by legality of such transaction’ in case of hire purchase transactions.Financial Accounting

As for example in case of gold which has specified market value, revenue is recognized in the accounting period when agreement take place not in the period when it’s sales take place. Answer: Basis assumptions accounting are Accounting Entity, Accrual, Going Concern, Money Measurement and Accounting Period. Another amendment in Companies Act was made in 2000, which has made the Directors of a company responsible to make a disclosure on compliance of accounting standards. In course of accounting work there may be some errors, which may cause disagreement of the Trial Balance.

Accounting Treatment: When Shortworking is carry forwarded, no journal is required to pass in Lessee and Lessor books. As discussed earlier, reconciliation is necessary when the cost and financial accounts are maintained separately. These items cause the difference in profit between the financial and cost accounting. Knowing accounting and basic business law is quite an edge if you’re a businessman or is self-employed.

If there are difference between the overhead shown by the financial account and cost account, there cause in the difference in profit as shown by these accounts. If there is difference in the method of stock valuation between the financial and cost accounting, it results in the difference in profit as well. Under cost accounting, the stock valuation is done according to the cost price whereas in financial accounting it is done in cost or market price whichever is less. The process of preparations of a statement in funding profit-loss of one accounting (statement) method on the basis of another accounting (statement) method is known as cost reconciliation.

Financial Accounting