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This is an example of a statement of compliance with GAAP which is usually included in the financial statements of aĬompany. The principal policies are consistent with those applied in the previous year.’ ‘The principal accounting policies of the company and the disclosures made in the annual financial statementsĬonforms to Indian Standards of Generally Accepted accounting Practice and comply with International Financial
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When it prepared its financial statements. The accounting policies are the practices and principles that the entity has applied
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If you refer to the notes of the financial statements, you will normally find that the first notes listed are theĪccounting policies of the entity. If an entity's financial reports are prepared in accordance with GAAP standards, then these financial reports will state GAAP consists of a number of practices and principles that govern how the financialĮvents of a business are recognized, measured and reported. It was these needs that resulted in the formulation and implementation of Generally Accepted Accounting Relevant to their information needs, and in a form that makes it possible to compare their investments in the entity The shareholders therefore require the information about an entity's financial affairs to be reliable, In addition, shareholders cannotĮvaluate the success of their investments without comparing the entity's financial results with other investment Know reliably represents the entity's financial position and financial performance. StakeholdersĪre prepared to make investment and other decisions about the entity only if they have financial information that they Recognizing, measuring and reporting business events all result in the communication of relevant and reliableįinancial information to stakeholders in order to assist them in making their respective decisions. Whether to continue to supply goods on credit (in the case of the suppliers), whether to use the entity as a preferred To make certain financial decisions in relation to the entity, such as whether to invest (in the case of the investors), Investors, suppliers, customers, regulators and the Revenue Service of Government. The accountant also needs to communicate an entity's financial affairs to other stakeholders such as potential Well as to evaluate the success of previous decisions in increasing the equity of the company. The directors and managers use theįinancial information provided in financial reports to make financing, investing, operating and dividend decisions, as Senior employees, for example, the managers and directors of the company, who are appointed by the shareholders,Īnd who are responsible for safeguarding the shareholders' investment. Improving the financial position of the entity, thereby creating wealth for the owners. Financial accountingįacilitates the preparation of the reports that shareholders use in this decision-making process.įinancial information is also needed by the decision-making individuals who have been given the task of Shareholders to decide whether to keep, increase or reduce their investment in the company. Shareholders need information to estimate the potential return on the capital they have invested, and toĪssess whether the company has increased their wealth over a particular period of time.
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The ownership of shares in a company isĪn investment for a shareholder, who demands a return commensurate with the level of uncertainty attached to that One of the stakeholders of a company is the owner - the shareholder. There are several stakeholders that have an interest in knowing the financial position of theĮntity, as well as how this financial position has changed over time. The accountant's purpose is to help communicate the effect of business events and transactions on the financial # business environment with regard to its financial statements. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in theĪ GAAP standard is issued to prescribe or clarify how an accountant must treat a business event or a situation in the Generally accepted accounting principles (GAAP) are the standard framework of guidelines for financialĪccounting used in any given jurisdiction generally known as accounting standards or standard accounting practice. GAAPGeneral Accepted Accounting Principles (US and Indian)