Generally accepted accounting principles-gaap, accounting, Basic Statistics

Generally Accepted Accounting Principles-GAAP: GAAP is an Americanized term for the accounting standards and procedures that need to be followed by companies while compiling their financial statements.  It includes the standard conventions and rules that need to be followed in maintaining financial transactions. GAAP ensures that the financial data is free from inconsistency and bias, and thus ensure that the financial statements provide a true and fair view of the actual transactions that have occurred in the business. GAAP classifies balance sheet items, puts down rules for revenue recognition etc.

Advantages of GAAP

Helps maintain creditability with stakeholders and creditors

Ensures that the financial reports show the true financial position of the company

The Generally accepted accounting principles are varied across nations. However, they are based on basic principles which are given below-

Principle of relevance - This principle ensures that all the information presented in financial statements should be relevant in assisting a person evaluate the statements.

Principle of regularity - The principle of regularity ensures that the statements are in conformance with the enforced rules and laws.

Principle of sincerity - The principle of sincerity ensures that the accounts department of the company should show the reality of the company's financial status in an appropriate manner.

Principle of consistency:  The principle of consistency ensures that a company follows the same rules and principles for all items in accounting. This will help ensure consistency across all the items of accounting in an organization.

Principle of non-compensation:  This principle states that the company should show complete details of its financial performance and should not change debt for an asset or revenue with expense. 

Principle of continuity:  The principle of continuity states that while making financial records and statements, one must assume that the business shall continue without any interruption.

Principle of periodicity:  According to the principle of periodicity, each entry in the financial statements should represent a given period and it should be made according to that given period. For e.g. If a customer pays money in installment i.e. they pay on monthly basis. In this case the amount collected should be split between the various months instead of accounting the entire amount to the transaction date.

Principle of Full Disclosure - According to the principle of full disclosure, it is essential for companies to disclose all information regarding their financial position. The financial records of the firm should be such that it mentions all the financial transactions and activities.

Principle of Utmost Good Faith: According to the principle of utmost good faith, all the information with regards to the organization should be disclosed before taking any insurance policy. offer unique solution in Accounting

Posted Date: 2/25/2012 7:49:13 AM | Location : United States

Related Discussions:- Generally accepted accounting principles-gaap, accounting, Assignment Help, Ask Question on Generally accepted accounting principles-gaap, accounting, Get Answer, Expert's Help, Generally accepted accounting principles-gaap, accounting Discussions

Write discussion on Generally accepted accounting principles-gaap, accounting
Your posts are moderated
Related Questions
Bambridge Associates LLP has hired you to analyze the demand in 30 regional markets for custom financial plans for high net worth individuals (Y). A statistical analysis of demand

An occupational health inspector was interested in determining whether there is a difference in the loss in man-hours due to accidents  by introducing a new safety programme.  The

For this second assignment you will have to use the OECD database to investigate possible changes in the policy preferences of Western welfare states. You have to develop (i) an in

what''s the asset?

BALANCE SHEET A financial report that shows the resources, obligations, and stock of a business at a specified time frame in complying with usually recognized sales concepts (GAAP

16 people to line-up ( 12 boys 4 girls). in how many ways could they line-up with all 4 girls in last (anyorder)?

how to calculate crude date rate?

To determine the amount at which inventory should be reported on the December 31 Year 1 balance sheet, Monroe Company compiles the following information for its inventory of Produc

A, Explain how a person can be free to choose but his or her choices are casually determined by past event B , Draw the casual tree for newcomb's problem when Eve can't perfectl