(2) The accounting profession as fat a long time telied on certain accounting comentions to guide the accounting practice. From the following principles of comenting, white shatt noter and Explain the it importance in preparation of financial statements. (i) The historical entity Principle (ii) The histational cast principle (iii) The monetary principle (iv) The matching principle (v) the conservatism pxinciple

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(2) The accounting profession as fat a long time telied on certain accounting comentions to guide the accounting practice. From the following principles of comenting, white shatt noter and Explain the it importance in preparation of financial statements. (i) The historical entity Principle (ii) The histational cast principle (iii) The monetary principle (iv) The matching principle (v) the conservatism pxinciple

Answer 1

The correct answer is (i) The historical entity principle.The historical entity principle is a fundamental accounting concept that states that the financial activities of a business should be kept separate from the personal financial activities of its owners or other businesses. This principle ensures that the financial statements of a business accurately reflect its financial position and performance, without being influenced by the personal financial activities of its owners or other businesses.The importance of the historical entity principle in the preparation of financial statements is as follows:1. Accuracy and reliability: By keeping the financial activities of a business separate from its owners or other businesses, the historical entity principle ensures that the financial statements accurately reflect the financial position and performance of the business. This allows users of the financial statements, such as investors, creditors, and management, to make informed decisions based on accurate and reliable information.2. Consistency and comparability: The historical entity principle promotes consistency and comparability in the preparation of financial statements. By maintaining separate financial records for each business entity, it allows for the comparison of financial performance and position across different periods and between different businesses.3. Transparency and accountability: The historical entity principle promotes transparency and accountability in the financial reporting process. By keeping the financial activities of a business separate from its owners or other businesses, it ensures that the financial statements are prepared in a transparent and accountable manner, without any undue influence or manipulation.In summary, the historical entity principle is a fundamental accounting concept that ensures the accuracy, reliability, consistency, comparability, transparency, and accountability of financial statements, which are essential for the effective functioning of the accounting profession and the preparation of financial reports.

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