Importance Of Accounting Principles

Question 1

1. Useful for Decision Making

Answer 1

Financial accounts help investors and stakeholders make informed decisions.

Based on GAAP, comparisons are made easier across different periods or companies.

Question 2

2. Ensures Accountability and Transparency

Answer 2

Reports prepared using GAAP promote clear and transparent presentation.

Reflects true financial performance to interested parties.

Question 3

3. Improves Reliability

Answer 3

Reports based on standard principles are seen as accurate and complete.

Investors can trust the financial information for decision-making.

Question 4

4.Guides Accountants

Answer 4

Acts as a framework for preparing and presenting financial statements.

Limits personal bias and increases objectivity.

Question 5

5. Avoids Manipulation

Answer 5

Prevents accountants from altering data to mislead.

Builds investor confidence in the authenticity of financial reports.

Question 6

6. Uniformity in Presentation

Answer 6

GAAP provides a common format for presenting accounts.

Makes reports universally understandable and acceptable

Question 7

7. Maintains Consistency

Answer 7

Ensures uniform recording and reporting year after year.

Enhances accuracy and efficiency in financial operations.