Вопрос
(2) The accounting profession as for a long time relied on certain accounting conventions to guide the accounting practice . From the following principles of convention , white short notes and Explain their importance in preparation of financial statements. (i) The historical entity Principle (ii) The histational cost principle (iii) The monetary principle (iv) The matching principle (v) the conservatism pxinciple
Решения
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Ответ
The accounting profession has long relied on certain accounting conventions to guide the preparation of financial statements. These conventions are principles that provide a consistent and standardized approach to accounting. Here are the principles of convention and their importance in the preparation of financial statements:(i) The historical cost principle: This principle states that assets and liabilities should be recorded at their original cost, which is the amount paid or received at the time of acquisition or settlement. This principle ensures that financial statements reflect the actual cost of assets and liabilities, providing a reliable basis for financial analysis and decision-making.(ii) The historical cost principle: This principle states that assets and liabilities should be recorded at their original cost, which is the amount paid or received at the time of acquisition or settlement. This principle ensures that financial statements reflect the actual cost of assets and liabilities, providing a reliable basis for financial analysis and decision-making.(iii) The monetary principle: This principle states that only transactions and events that can be expressed in terms of money should be included in the financial statements. This principle ensures that financial statements provide a consistent and comparable measure of financial performance and position, allowing for meaningful analysis and comparison.(iv) The matching principle: This principle states that expenses should be matched with the revenues they help generate. This principle ensures that financial statements accurately reflect the relationship between revenues and expenses, providing a clear picture of a company's profitability and financial performance.(v) The conservatism principle: This principle states that when faced with uncertainty, accountants should choose the method that will least overstate assets or income. This principle ensures that financial statements provide a conservative view of a company's financial position and performance, which can help prevent overstatement of assets or income.In summary, these principles of convention are essential in the preparation of financial statements as they provide a consistent, standardized, and reliable basis for financial analysis and decision-making. They ensure that financial statements accurately reflect the financial position and performance of a company, allowing stakeholders to make informed decisions.