Question

Rules of conduct accepted universally to record business transactions are known as ___________.

• A. Accounting Principle
• B. Accounting Standards
• C. Accounting Concepts
• D. All of the above

Answer 1

The correct option is D All of the above

In order to maintain uniformity and consistency in accounting records, certain rules or principles have been developed which are generally accepted by the accounting profession. These rules are called by different names such as principles, concepts, conventions, postulates, assumptions and modifying principles. The term 'principle' has been defined by AICPA as 'A general law or rule adopted or professed as a guide to action, a settled ground or basis of conduct or practice'. The word 'generally' means 'in a general manner', i.e. pertaining to many persons or cases or occasions. Thus, Generally Accepted Accounting principles (GAAP) refers to the rules or guidelines adopted for recording and reporting of business transactions, in order to bring uniformity in the preparation and the presentation of financial statements.