Need for accounting principles

 

Need for accounting principles

Consider the possibility of every business having its principles of accounting and preparing its financial statements. Thousands of different formats in financial statements would be present for the same financial information. Businesses themselves will find it hard to evaluate their performance, compare their competitor’s financial statements or approach each other for raising funds, supplying goods, etc. Financial data and statements would be useless in evaluating businesses, as there would be no common format or principle followed when preparing the financial statements. That’s why accounting principles are needed to provide a form of standardisation and uniform reporting of financial statements and accounting practices.

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