Accounting principles are generally based on:

Correct option is A

Accounting principles are generally framed based on practicability, meaning they should be practical, useful, and applicable in real-world business situations. The aim is to ensure that financial information is relevant, reliable, comparable, and understandable to users like investors, creditors, and regulatory bodies.

While accounting theory can be conceptual, principles must be operational and implementable. Hence, generally accepted accounting principles (GAAP) or Accounting Standards (AS/Ind AS) emphasize practical application—balancing theoretical soundness with business feasibility. For example, the principle of materiality ensures that only items with practical significance are recorded in detail, while conservatism guides accountants to make prudent choices when uncertainty exists.

Information Booster:

• Accounting principles must be realistically applicable in various business scenarios.

• They must offer guidance that can be followed consistently across businesses.

• Accounting frameworks like GAAP, IFRS, and Ind AS prioritize practical considerations.

• Practicability ensures the cost-benefit analysis of reporting is maintained.

• The principle of substance over form is another example of practicability in action.

• Standards evolve over time to remain practically relevant in modern business contexts.

• Practicability promotes global harmonization and credibility in financial reporting.

Additional Knowledge:

(b) Subjectivity:
Accounting aims to be objective and standardized. Subjectivity may lead to bias or manipulation and is avoided. Only areas like estimates (e.g., depreciation) have limited subjectivity governed by rules.

(c) Convenience in recording:
While convenience is useful, accounting principles are not formed based on ease but on accuracy, reliability, and compliance. Simplicity is secondary to faithful representation of financial facts.

(d) Legal framework:
Though accounting standards align with legal requirements, they are not based solely on law. Principles are developed through accounting bodies and may influence legal frameworks, not the other way around.