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(4)-THE REGULATORY SYSTEM OF ACCOUNTING

Monday, October 19, 2009

The Regulatory System of Accounting

The following factors can be identified as regulatory framework of accounting,
  • Company law.
    Limited companies are required by law to prepare and publish accounts annually.
  • Accounting concepts and individual judgment.
    Financial statements are prepared on the basis of a number of accounting principles, many figures in financial statements are derived from the application of judgment in putting those concepts into practice. Some of the examples are follows
    -Accounting for inflation.
    -Research and development, it is an investment to generate future revenue.
    -Valuation of buildings in times of rising property prices.
  • Accounting standards.
    In an attempt to deal with some of the subjectivity and to achieve comparability between different organizations accounting standards were developed
  • International influences.
    One of the most important influences on financial accounting is the international accounting standards committee. The international accounting standards committee was setup in 1973 to work for the improvement and harmonization of financial reporting. Its members are professional accounting bodies all over the world.
  • Generally accepted accounting practice. (GAPP)
    This term has sprung up in recent years and signifies all rules, from whatever source, which govern accounting.

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