(1) What is GAAP? (3 marks);

(2)Suppose you observed such an activity: a business successfully persuades a customer to adjust some words of contracts about future service provision. In actual practice the business has not yet provided the service to the customer. But in the bookkeeping system, the unearned revenue (future revenue) becomes current revenue. Accordingly, some future profits are moved to the account of current profits in the financial report.

Explain the concept of creative accounting; and identify which creative accounting method relates to this activity (7 marks);

(3) Explain the concepts:

The rule-based system of accounting, and principle-based system of accounting (5 marks);