Background: Accounting is a language of the business. Financial statements prepared by the accountants communicate financial information to the users of the accounts in a way that they can make an informed decision. That's why, it's very important that financial statements prepared by different organizations for different periods should be uniform. Consistency is very important across the organizations and over a period of time otherwise there will be an utter confusion. There will also not be a fair and true comparison between performances of different organizations or the performance of an organization between past and current periods. To avoid confusion and receive uniformity, accounting process is performed within the framework of GAAP (Generally Accepted Accounting Principles). GAAP describes the rules developed for the preparation of the Financial Statements. These rules are termed as conventions, principles, concepts, etc. These GAAP rules are the backbone of the accounting system. Accounting Principles are the basic assumptions and norms on which the whole accounting process is based. Apart from this, accountants also follow various Accounting Standards prescribed by the regulatory authority which provides standardization of accounting policies to be followed under specific circumstances. The terms "convention", "concepts" or "principles" are slightly different when it comes to their dictionary meanings but they are used interchangeably in the accounting theories. Accounting Principles are accounting assumptions which have been adopted by various organizations over a period of time and have a broad consensus if not universal applicability, They serve as an explanation of the current practices and as a guide for selecting the correct procedure when alternatives exist. Accounting Principles must satisfy the following conditions: 1. They should be based on real assumptions: 2. They should be simple, understandable and explanatory; 3. They must be followed consistently; 4. They should be able to reflect future predictions: 5. They should be informational for the users. Required: Let's imagine a situation preparing financial stateme different profits with hug statement very different fi This problem has been solved! confused that which one ! accepted set of rules provi and in better presentation o See the