Paper Topic:

Introduction, Review of Accounting Process and Financial Statements

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Part 1

General acceptable accounting principle

General accounting principles are set of rules generated by accounting board to guide accountant in preparation and reporting of financial statements . General acceptable accounting principles are accounting guidelines (GAAP ) used in United States and are issued by financial accounting standard board (FASB . Other countries uses the guideline issued by international accounting standard board (IASB ) supplemented by their own local laws . GAAP guide selection of events to be accounted for , the measurement of these

events , and the mean of summarizing and communicating them to interested parties . In recording transactions GAAP make use of the following principles

historical cost principle

revenue recognition

marching principle

full disclosure

GAAP facilitate comparability of financial statement for various firms Information that has been measured and reported in a similar manner for different enterprise is considered comparable . Comparability enables users to identify the real similarities and differences in economic phenomenon . Comparability is achieved when companies use similar

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accounting procedures (e .g . use of same inventory method , depreciation to account for similar economic circumstance (Porwal , 2008

Double entry accounting

This is the method of recording accounting transaction where every debit entry must be accompanied by a credit entry and vice versa . If this method of accounting is not enforced then the basic accounting equation i .e . ASSETS LIABILITIES EQUITY will not balance . Therefore double entry accounting is used to ensure that financial record are complete and thus ensures that final statements give a true...

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