What is GAAP?
GAAP or Generally Accepted Accounting Principles refers to the rules and parameters specified by the Accounting Practice Committee of the Regulated Practical Advice. GAAP also includes some accounting methods that may not have been brought by any authority.
GAAP aims at:
GAAP is designed to make accounting more transparent and to provide investors and creditors with ease. One of the goals of GAAP
1) Providing information to investors and creditors to make reliable decisions on loans and investments.
2) Providing information on resources, resources and finances.
3) Investor and Creditor Survey for Investing or Loan Viability
Principles of GAAP:
This section discusses some of the GAAP Principles
1) Historical Cost Principle: be made on the cost of purchasing assets and not at fair market value.
2) Revenue recognition Receipt: The financial statement must state whether or not the revenue is earned
3) Total disclosure principle: The extent of disclosure is based on trade analysis.
4) Appropriate Principle: Expenditures Must Be Proportional
There are some basic assumptions about the rules for making GAAP more effective
1) Thinking: Business Long Term
2 ) Assuming an Entity Entity: Business is an independent and non-owner of a business.
3) Assumption of Monetary Assets: The monetary currency that will be used to capture financial statements will be a stable currency.
4) Assuming Periodic Reports: Business activities should be reported regularly and reports are regularly distributed.
GAAP Limits Financial Statements
1) The benefits of financial reporting should be taken into account with the cost of transferring information
2) Procedures should strictly follow GAAP practices
) The most accurate one is to be chosen on the basis of the two financial statements
In addition to these principles and agreements, the financial statement must be relevant and reliable as investors and creditors make decisions on the basis of their decisions. The report must meet the standards required to compare the reports of different businesses. Reports should be consistent and the accounting method should not change too much over time. GAAP assists financial statements in meeting the above and prevents financial misuse. To learn more about how to implement GAAP in your financial statements, ask small business professionals to help you prepare a financial report that implements the most important GAAP standards
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