Accounting Principles

Accounting Principles Synopsis: The confusion between accounting principles, standards, formats, methods among businesses is going on from the 19th century. This is because large business might follow a different method against a small business but even though the standards, the formats are the same, as the principles might differ. So is the confusion between a service organization and a not non service organization, between a profit oriented organization and service oriented organization. That's why the …

…the measure loses explanatory power [Biddle et al. 1997]. Accrual basis method of accounting is therefore the best method that can be used especially in today's world where businesses are almost always run on credit terms as it will show the true new worth of a business. Therefore it is not incorrect to say, "Financial statements prepared on a cash basis of accounting may distort the portrayal of financial position and operating results of a business".