The course is based on the following assumptions about current accounting practices practice:
- In the modem world no business can afford to remain secretive because various parties such as creditors, employees, taxation authorities, investors, public and government etc., are interested to know about the affairs of the business.
- Affairs of the business can be studied mainly by consulting final accounts and the balance sheet of the particular business.
- Final accounts and the balance sheet are end products of book-keeping. Because of the importance of these statements it became necessary for the accountants to develop some principles, concepts and conventions which may be regarded as fundamentals of accounting.
- Such fundamentals having wide acceptance give reliability and creditability to the financial statements prepared by the accountants.
- The need for ‘generally accepted accounting principles’ arises for two reasons: First, to be logical and consistent in recording the transactions and second, to conform to, the established practices and procedures.