Question

Why are Generally Accepted Accounting Principles (GAAP) needed?

Answer 1

Accounting principles are necessary due to the following reasons:

1. Accounting principles facilitate uniformity in accounting practices. The information become comparable, leading to better analysis and comparison of performances.
2. Accounting principles facilitate meaningful presentation.
3. They ensure consistency in the accounting statements of a business enterprise from year to year.
4. They may be regarded as a means to establish that the collective wisdom and experience, rather than the viewpoint of individual accountant, may prevail in the matter.