Question

use your own words to explain how legal system affect accounting?

Answer 1

The main factors that impacts an accounting system in a country includes the legal system, inflation, taxation, financial intermediaries, and the economic and political ties. The legal system is mainly concerned on how the principles of accounting are established; and two main types of legal system include the “code law” and “common law.” The Code law countries usually have an accounting law and legislated accounting principles, which is rather general and would not give much detail. On contrary the common law countries have principles established by non-legislative; and usually provide wide detail in the accounting laws of these countries

Common law impacts the accounting system because it sets regulations, rules and guidelines that the corporation must follow to stay in business. In America specific independent groups establish specific rules on accounting which is very detailed. However the code law accounting laws in laws tends to be general and lacks the detail toward specific accounting practices