Accounting policies

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accounting (noun, ac-count-ing, /əˈkaʊnt̬ɪŋ/) policies (plural noun, pol-i-cies, /ˈpɑːləsiz/)

Definition: are specific procedures, principles, and rules that are implemented by the company’s management in order to prepare and report its financial statements. Accounting policies serve to ensure that all of the transactions are recorded correctly, the financial statements are produced properly, and the accounting activities are managed consistently at all times. These policies are most prevalently implemented to deal with more complex accounting practices, for instance, recognition of goodwill, inventory value, depreciation methods, development costs, consolidation of financial accounts, etc.

In a Sentence:

  1. Some companies use accounting policies to manipulate their earnings legally. If you are an investor, take this point into consideration.
  2. Studying a business’s accounting practices can give you an idea of its type of management. When dealing with the earning reports, it may be either aggressive or conservative, and accounting practices can help you figure that out.
  3. Accounting policies are necessary since each business or organization has to follow an applicable accounting framework.

Synonyms and related terms: accounting activities, accounting principles, accounting practices, Generally Accepted Accounting Principles, Financial Reporting Standards, accounting controls

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