Question

1) explain and describe how the accounting equation is used .

2)explain the key standards and principles for reporting financial statements .

3)what is the role of ethics in accounting , describe the role of ethics in accounting and how important it is .

4) what is the purpose of the International Accounting Standards Board and why does it exists.

Answer 1

The accounting equation is mainly used in the double entry accounting which represents the relationship between the assets, liabilities and equity of a business organization. In case of an accounting equation, total liabilities and total assets must be equal. This it can be represented as below:-

Assets = Liabilities + Equity

Both the sides of the accounting equation should be equal as in order to buy things, either debt or capital is used.

Answer:- Generally Accepted Accounting Principles are used for reporting financial statements which are stated as below:

The Business as a Single Entity Concept: in this, it is considered that business is a separate entity from the owners and its shareholders.

The Specific Currency Principle: While representing the accounting information, a certain currency must be used.

The Specific Time Period Principle: All the financial statements must be related to a specific time period.

The Historical Cost Principle: For the valuation purposes, the prices at which products are bought and sold would be used.

The Full Disclosure Principle: Each aspect of the financial transactions must be disclosed by the business.

The Recognition Principle: All the incomes and expenditures must be expressed during that period in which they occurred.

The Non-Death Principle of Businesses:- it is assumed that the business will remain functioning for eternality.

The Matching Principle: All the debit accounts must be equal to credit accounts

The Principle of Materiality: The accountants have to use their judgements while preparing financial statements.

The Principle of Conservative Accounting: Expenses are recorded immediately while incomes are recorded only when the cash is received.

Answer:- Accounting can be defined as the process in which the business is represented in the form of numbers. It is very important for the organization to have the honest and accurate bookkeeping numbers in order to represent what actually happening in the organization. The honesty and accuracy are the issues which mainly deal with the ethicality and financial issues. The ethical accounting principles expect that all the accurate financial data must be reported to all the stakeholders without any modification. If this is not done then there can be some serious consequences to business owners, tax reporting agencies and stakeholders.

Answer:- International Accounting Standards Board was mainly developed to create a single combination of high quality, applicable, understandable and universally accepted international financing reporting standards which should be based on the defined principles.