1 Discuss the accounting principles techniques and practices

1. Discuss the accounting principles, techniques and practices followed by business firms in maintaining their accounts 2. Explain the Accounting rules and regulations. 3. Examine quantitative reasoning processes to analyze and solve accounting problems. 4. Identity how the owners\' equity section in a corporate balance sheet differs from that in a sole proprietorship or a partnership 5. Evaluate the role of ethics in the accounting process. 6. Explain the regulation of financial reporting. 7. Explain how accounting information assists in making decision.

Solution

Answer -

Answer- The business firms follow the Generally Accepted Accounting principles (GAAPs) in order to maintain their accounts. The fundamental accounting assumptions followed are a) Going concern, b) Accrual and c) consistency.

GAAP includes principles on:

2. Explain the accounting rules and regulations.

Answer –Accounting rules and regulations are important to bring uniformity in the preparation and reporting of the financial statements. These rules help investors and creditors to compare companies.

In order for the accounting system to produce useful information, some rules and guidelines must be followed. They are classified into three categories:

These rules and guidelines are all fairly natural. They are designed to make the accounting documents as useful as possible.

3. Examine quantitative reasoning process to analyse and solve accounting problems-

Quantitative reasoning is very important in order to solve various accounting problems. For Example, if an entity loses a small contract, it will not impact it so much when compared to losing a big contract.

Quantitative Accounting information is usually restricted to that which can be easily quantified. Value considerations, such as how long the business has been in existence or the length of service of the staff are usually ignored. And yet surely these factors are worth something to a long-established entity compared with a newly created business.

Thus, for getting a good idea about the business firm, the quantitative reasoning is very important.

4. Identify how the owner’s equity section in a corporate balance sheet differs from that in a sole proprietorship or a partnership?

Equity section under each:

5. Evaluate the role of ethics in the accounting process?

Ethics are very important in every part of life including the accounting process. If the accounts are represented correctly, it will help the investors and creditors to make an informed decision of investment. It is also very important for the goodwill of the company. The GAAPs provide four basic ethical rules – prudence, consistency, objectivity and relevance. These are defined so that the books are accounted in a fair manner which provides a useful analysis for the users.

If the ethics are not followed, then there will be no quality assurance of the business and it will be difficult for going concern of the business in long term.

6. Explain the regulation of financial reporting?

7. Explain how accounting information assists in making decision?