NCERT Solutions for Class 11 Accounting Chapter 2 Theory Base of Accounting

Theory Base of Accounting concepts are fundamentally the basic ideas holding the theory base of accounting and therefore, can be regarded as general working practices for all accounting activities. The Generally Accepted Accounting Principles (GAAP) refer to the rules that are used for reporting and recording of business transactions, to maintain consistency in the preparation of financial statements. These principles of accounting are not immobile and are regularly influenced by the legal, social and economic environment surrounding the companies and the system. Business Entity Concept: The concept of business entity says that a business is a separate entity from its owners. Therefore, for the objective of accounting, the firm and its owners are considered as two distinct persons. The theory base of accounting consists of principles, concepts, rules and guidelines developed over a while to bring uniformity and consistency to the process of accounting and enhance its utility to different users of accounting information.