Accounting principles have been developed in order to provide a fundamental structure to basic monetary reporting. It is only the accounting professionals who make use of monetary reporting. So, accounting principles have to ensure that they do not misinform the accounting professionals.
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What is generally accepted accounting principles?
Accounting principles are those guidelines that are followed by accounting professionals who first record and then summarize various financial transactions. They make use of these principles to prepare financial statements. If you are able to get a proper understanding of these accounting principles then you will surely be able to make good decisions relating to investments.
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Importance of accounting principles
It is important that Financial Accounting information that you get is assembled as well as reported objectively. There are third parties who greatly rely on Financial Accounting information and so data received should be free from inconsistency as well as bias. So it is very important for accounting to be based on certain principles that are known as “Generally accepted Accounting principles.”
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