Generally Accepted Accounting Principles (GAAP)

Generally Accepted Accounting Principles (GAAP)

a set of principles where they are a set of rules considered vital in the realm of accounting

What are GAAP facts?

1) Transactions get recorded twice (checks/balances) 2) Financial statements report on the business entity only (not owner/not investors) 3)Debts are paid within one year, or one business cycle, whichever is longer

Who made GAAP?

Financial Accounting Standards Board (FASB); a third party governing body

Historical Cost Principle

GAAP principle; assets are reported at historical costs (book or true value)

Going-Concern Principle

GAAP principle; assume that the business will last forever

Stable Monetary Unit Principle

GAAP principle; assumes value - currency stays the same each year

Conservative Principle

GAAP principle; resolving finical statement. uncertainty in the least favorable way

Objectivity Principle

GAAP principles; transactions are recorded using the best objective evidence (it is what it is)