What is GAAP (generally accepted accounting principles)?GAAP (generally accepted accounting principles) is a collection of commonly followed accounting rules and standards for financial reporting. The acronym is pronounced gap. Show
GAAP specifications include definitions of concepts and principles, as well as industry-specific rules. The purpose of GAAP is to ensure that financial reporting is transparent and consistent from one public organization to another, and from one accounting period to another. GAAP emerged in the 1970s and involved the following four major rules and standards:
What are the 10 principles of GAAP?GAAP is outlined by the following 10 general concepts or principles.
Beyond these 10 general principles, public U.S. companies adhering to GAAP are expected to observe the following four additional guidelines to support the consistency and accuracy of financial statements.
Who uses GAAP?Accountants and other financial professionals use GAAP rules and standards to organize and present the financial reporting periodically required by publicly traded companies within the U.S. Since GAAP is intended to ensure complete, accurate and consistent financial reporting between businesses, it affects investment decisions by enabling investors to objectively compare business performance and influences the stability of the investment market. There is no universal GAAP standard and the specifics vary from one geographic location or industry to another. The U.S. Securities and Exchange Commission (SEC) mandates that financial reports adhere to GAAP requirements. The Financial Accounting Standards Board stipulates GAAP overall and the Governmental Accounting Standards Board stipulates GAAP for state and local government. Publicly traded companies must comply with both SEC and GAAP requirements. GAAP vs. IFRS: What is the difference?Many countries around the world have adopted International Financial Reporting Standards (IFRS). IFRS is designed to provide a global framework for how public companies prepare and disclose their financial statements. Today, IFRS is the preeminent international accounting standard for financial reporting, and 144 out of 166 countries or jurisdictions around the world use IFRS. Although GAAP and IFRS serve the same fundamental purposes, there are some key differences between them, including the following.
Adopting a single set of worldwide standards simplifies accounting procedures for international countries and provides investors and auditors with a cohesive view of finances. IFRS provides general guidance for the preparation of financial statements, rather than rules for industry-specific reporting. This was last updated in March 2022 Continue Reading About GAAP (generally accepted accounting principles)
Which of the following accounting principles would require that all good and services purchased be recorded at cost?Answer and Explanation: The correct answer is b. Cost principle. This is because this principle suggests that the goods should be recorded in the book at their actual actual cost only.
Which of the following accounting principles would require that all goods and services purchased be recorded at cost quizlet?The revenue recognition principle requires that revenue be reported when revenue is earned (when goods are sold or services are provided) and not at the time when payment is received. The cost principle requires that assets and other transactions be recorded at cost.
Which principle requires companies to record the purchase of goods services or capital assets at the price they paid for them?Historical Cost Principle – requires companies to record the purchase of goods, services, or capital assets at the price they paid for them.
Which of the following is one of the accounting principles?The most notable principles include the revenue recognition principle, matching principle, materiality principle, and consistency principle. Completeness is ensured by the materiality principle, as all material transactions should be accounted for in the financial statements.
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