By Arthur Hindmarch
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Extra resources for Accounting: An Introduction
And are known as 'generally accepted accounting principles'. There may, however, be additional principles which are acceptable provided they have sufficient support from accountants and businessmen. K. A. , as for example in Spain and Portugal, the idea of generally accepted accounting concepts does not have the same force. Two recent developments may help to reduce the differences between countries. One was the establishment of the European Economic Community and its programme to harmonise company law in the Community.
This is an example of the realisation and conservatism concept working together. Entity. If accounting information for a unit of organisation is to be meaningful it is important to identify the entity of the unit and distinguish it from other units. For example, a sole trader's business unit should be distinguished from his domestic activities. g. expenses imposed on the locality by the business's smoky chimney. These effects are normally termed externalities. Objectivity. Accounting information should be based as far as possible on objective evidence.
5). Thus the separation of capital and retained profit is a legal disclosure requirement under the Companies' Acts, 1948 and 1967 (see App. 3, note 14). Alternative legal frameworks for providing some assurance to creditors other than by making capital non-repayable are suggested by European Communities Law. Thus some of the changes in net worth of a firm during an accounting period may be the result of capital, or profit and distributions. The profit model first introduced in Sect. 3 must be modified to: re-arranged to P, = V, - V,_I + D - C where D, and C, are, respectively, the distributions and new capital for a period.
Accounting: An Introduction by Arthur Hindmarch