s undesirable alternatives. This process may well go further than codifying existing practice. However, not all situations can be catered for. It must be recognised, therefore, that it will be necessary to exercise judgement in applying statements of GAAP.

Most company acts around the globe requires that 'the financial statements of a company shall in conformity with generally accepted accounting practice, fairly present the state of affairs and the profit or loss…..'

The overriding requirement of the Company Act is fair representation. The existence of a standard is an aid to both comparabili

In the same way, a set of basic assumptions or concepts, thus serve as guidelines for the accounting discipline. These guidelines influence the manner in which accounting information is reported. Consequently, the practical application of accounting is more comprehensible if the underlying theoretical base's of accounting is studied.

If each undertaking reported its own financial information as it saw fit, the result would be chaos. To bring order into the accounting and reporting processes, over the years the accounting profession has developed an underlying basis for measuring and disclosing the results of business transactions and events. This consists of a set of assumptions, concepts and procedures that together are known as, Generally Accepted Accounting Practise (GAAP).

The existence of GAAP does not imply that all undertakings should measure and report on all financial activities in the same manner. No two undertakings are the same; therefore, it would be impractical to have an inflexible system of measurement and reporting. The accounting profession developed GAAP as a framework which embraces the fundamental principles of measurement and reporting, but within which a certain amount of diversity is possible.

Accounting principles are entirely different from scientific principles. The latter principles are substantiated by extensive experimentation and observation. For example, detailed research and experimentation has ascertained that the speed of light is 3000 000km per second and, that every molecule of water is made up of two hydrogen and one oxygen atom.

In contrast to the laws of nature, accounting principles are not discovered; they are formulated to meet the objectives of financial reporting. In other words, a balance sheet is prepared to reflect the financial position of an enterprise at a particular time. This type of disclosure cannot be proved to be correct or incorrect. It is, however, the generally accepted method of reporting on the financial position of an enterprise.

The approach adopted in respect of the setting of standards is to identify the accounting practices that are desirable and thereby to limit differences in the variety of accounting practices without introducing rigid uniformity or laying down an inflexible set of rules for all circumstances. The objectives are to produce standards with as general as possible an application, but that eliminates undesirable alternatives. This process may well go further than codifying existing practice. However, not all situations can be catered for. It must be recognised, therefore, that it will be necessary to exercise judgement in applying statements of GAAP.

Most company acts around the globe requires that 'the financial statements of a company shall in conformity with generally accepted accounting practice, fairly present the state of affairs and the profit or loss…..'

The overriding requirement of the Company Act is fair representation. The existence of a standard is an aid to both comparabili

sults of business transactions and events. This consists of a set of assumptions, concepts and procedures that together are known as, Generally Accepted Accounting Practise (GAAP).

The existence of GAAP does not imply that all undertakings should measure and report on all financial activities in the same manner. No two undertakings are the same; therefore, it would be impractical to have an inflexible system of measurement and reporting. The accounting profession developed GAAP as a framework which embraces the fundamental principles of measurement and reporting, but within which a certain amount of diversity is possible.

Accounting principles are entirely different from scientific principles. The latter principles are substantiated by extensive experimentation and observation. For example, detailed research and experimentation has ascertained that the speed of light is 3000 000km per second and, that every molecule of water is made up of two hydrogen and one oxygen atom.

In contrast to the laws of nature, accounting principles are not discovered; they are formulated to meet the objectives of financial reporting. In other words, a balance sheet is prepared to reflect the financial position of an enterprise at a particular time. This type of disclosure cannot be proved to be correct or incorrect. It is, however, the generally accepted method of reporting on the financial position of an enterprise.

The approach adopted in respect of the setting of standards is to identify the accounting practices that are desirable and thereby to limit differences in the variety of accounting practices without introducing rigid uniformity or laying down an inflexible set of rules for all circumstances. The objectives are to produce standards with as general as possible an application, but that eliminates undesirable alternatives. This process may well go further than codifying existing practice. However, not all situations can be catered for. It must be recognised, therefore, that it will be necessary to exercise judgement in applying statements of GAAP.

Most company acts around the globe requires that 'the financial statements of a company shall in conformity with generally accepted accounting practice, fairly present the state of affairs and the profit or loss…..'

The overriding requirement of the Company Act is fair representation. The existence of a standard is an aid to both comparabili

diversity is possible.

Accounting principles are entirely different from scientific principles. The latter principles are substantiated by extensive experimentation and observation. For example, detailed research and experimentation has ascertained that the speed of light is 3000 000km per second and, that every molecule of water is made up of two hydrogen and one oxygen atom.

In contrast to the laws of nature, accounting principles are not discovered; they are formulated to meet the objectives of financial reporting. In other words, a balance sheet is prepared to reflect the financial position of an enterprise at a particular time. This type of disclosure cannot be proved to be correct or incorrect. It is, however, the generally accepted method of reporting on the financial position of an enterprise.

The approach adopted in respect of the setting of standards is to identify the accounting practices that are desirable and thereby to limit differences in the variety of accounting practices without introducing rigid uniformity or laying down an inflexible set of rules for all circumstances. The objectives are to produce standards with as general as possible an application, but that eliminates undesirable alternatives. This process may well go further than codifying existing practice. However, not all situations can be catered for. It must be recognised, therefore, that it will be necessary to exercise judgement in applying statements of GAAP.

Most company acts around the globe requires that 'the financial statements of a company shall in conformity with generally accepted accounting practice, fairly present the state of affairs and the profit or loss…..'

The overriding requirement of the Company Act is fair representation. The existence of a standard is an aid to both comparabili

of an enterprise at a particular time. This type of disclosure cannot be proved to be correct or incorrect. It is, however, the generally accepted method of reporting on the financial position of an enterprise.

The approach adopted in respect of the setting of standards is to identify the accounting practices that are desirable and thereby to limit differences in the variety of accounting practices without introducing rigid uniformity or laying down an inflexible set of rules for all circumstances. The objectives are to produce standards with as general as possible an application, but that eliminates undesirable alternatives. This process may well go further than codifying existing practice. However, not all situations can be catered for. It must be recognised, therefore, that it will be necessary to exercise judgement in applying statements of GAAP.

Most company acts around the globe requires that 'the financial statements of a company shall in conformity with generally accepted accounting practice, fairly present the state of affairs and the profit or loss…..'

The overriding requirement of the Company Act is fair representation. The existence of a standard is an aid to both comparabili

s undesirable alternatives. This process may well go further than codifying existing practice. However, not all situations can be catered for. It must be recognised, therefore, that it will be necessary to exercise judgement in applying statements of GAAP.

Most company acts around the globe requires that 'the financial statements of a company shall in conformity with generally accepted accounting practice, fairly present the state of affairs and the profit or loss…..'

The overriding requirement of the Company Act is fair representation. The existence of a standard is an aid to both comparability and fair presentation; however, compliance with a standard is no guarantee that fair presentation will be achieved in the accounting financial statements. Even though compliance with accounting standards is not necessarily sufficient for fair presentation, the standards are nevertheless highly influential and persuasive in that respect.