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Accounting Environment and Comparability of Accounts

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A. What are the elements of the accounting environment? How do they affect the financial statements? Why are these elements important? How do they affect comparability between companies?

B. What is the accounting equation? What does it tell you? Why does it have to balance? What happens if the equation does not balance?

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This posting discusses the elements of the accounting environment and the manner in which it affects the financial statements. In addition, the posting discusses comparability between companies.

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Accounting
A. What are the elements of the accounting environment? How do they affect the financial statements? Why are these elements important? How do they affect comparability between companies?

The elements of the accounting environment are the types of organization for which the accounting is done, the degree of rigor in enforcing the accounting rules, the accounting authorities, the users of the financial statement, the accounting professionals and the accounting systems.
They affect the financial statements in the following manner: The type of organization determines the nature of its income and assets, the degree of rigor in following accounting rules will determine to what extent the financial statements are accurate, the authorities determine the extent to which the authorities supervise and enforce the rules of accounting, the users of the financial statements will determine the quality of information provided ( for example if the main users are shareholders, the financial ...

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