Generally Accepted Accounting Principles (GAAP)
1. Explain Generally accepted accounting principles (GAAP)?
Generally accepted accounting principles (GAAP) are the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice.
The following is a list of the ten main accounting principles and guidelines together with a highly condensed explanation of each.
a. Economic Entity Assumption
The economic entity principle states that the recorded activities of a business entity will be kept separate from the recorded activities of its owner(s) and any other business entities. This means that you must maintain separate accounting records and bank accounts for each entity, and not intermix with them
…show more content…
Under time period assumption, we prepare financial statements quarterly, half-yearly or annually. Theincome statement provides us an insight into the performance of the company for a period of time. Thebalance sheet (also known as the statement of financial position) provides us a snapshot of the business ' financial position (assets, liabilities and equity) at the end of the time period. The statement of cash flows and the statement of changes in equityprovide detail of how the company 's financial position changed during the time period. One implication of the time period assumption is that we have to make estimates and judgments at the end of the time period to correctly decide which events need to be reported in the current time period and which ones in the …show more content…
It is because of this basic accounting principle that numerous pages of "footnotes" are often attached to financial statements. As an example, let 's say a company is named in a lawsuit that demands a significant amount of money. When the financial statements are prepared it is not clear whether the company will be able to defend itself or whether it might lose the lawsuit. As a result of these conditions and because of the full disclosure principle the lawsuit will be described in the notes to the financial statements. A company usually lists its significant accounting policies as the first note to its financial
Eagle Outfitters Financial Ratios Paper
705 Words | 3 PagesThe cash flow statement shows how cash comes in and disperses out from the financing, investing, and operating groups over a period of time. The heading in the statement of cash flows is similar to that of the balance sheet, income statement, and statement of stockholders’ equity by displaying the name of the entity, title of the statement, specific date of the statement, and unit of measure. Cash flows from operating, investing, and financing activities, positive or negative, over the change in cash plus the beginning cash balance, gives accountants the ending cash balance (Bethel,
FASB Accounting Standards Codification Case Summary
254 Words | 2 PagesABC offers separately priced extended warranties for appliances sold that are non-refundable and have no limits to the potential cost of honoring the warranty. Although ABC does track warranty profits and losses by appliance type, assume that no analysis has been performed to determine the rates at which cost are incurred throughout the warranty period. Assuming that manufacturer warranties provide coverage for the appliance for 1 year from the date of purchase, when should revenues and expenses of such warranties be recognized? FASB Accounting Standards Codification (ASC) topic 605-20-25-3 (Revenue Recognition) states that in regard to extended warranties “revenue shall be recognized in income over the period in which the seller is obligated
Ggb 515 Task 1
789 Words | 4 PagesAs such, governments adhere to a different set of financial reporting and accounting standards. Governmental accounting and financial reporting standards help stakeholders assess how public resources were acquired and how resources are or will be spent. Accounting is a systematic reporting and recording of assets, liabilities, capital, income and expenditure. Because the public sector operates under a different environment then the private sector, government accounting is specific to the functions of the public sector. State and local governments follow the principles and guidelines developed by the Government Accounting Standards Board (GASB).
One Stop Deca Cash Flow Statement
980 Words | 4 PagesAccounting for changes in all current assets and liabilities except notes payable and dividends payable will ensure that the income statement is filled
Macy's Accounting Principles
185 Words | 1 PagesThe financial data and the information provided in the analysis of the financial situation are following the accounting principles (GAAP). Some other data and results which are not accepted GAAP but related
Wgu Audit Task
529 Words | 3 PagesClients must keep records and books of accounts including cash book, sales ledger, purchases ledger and general ledger. Supporting documents such as invoices, bank statements, pay-in slips, cheque butts, and receipts for payments, payroll records and copies of receipts issued should be retained. A valuation of the stock in trade should be made at the end of the accounting period and the appropriate records maintained. Company should record sufficient to explain each transaction and to enable a true and fair profit & loss account and balance sheet to be prepared. At the end of the accounting period, a physical stock-take should be made to ascertain the quantity and the cost of the stock in hand or the cost of work in progress statements and
Xacc/280 Week 4 Mini Case
513 Words | 3 Pages1) a. current liability: Money that a business owner must pay to a creditor within 12 months of the balance sheet date is a current liability. Ideally, short-term assets, such as cash and accounts receivable, should more than offset short-term liabilities, such as accounts payable, notes payable and payroll. If they do, the company 's short-term liquidity position is positive, which suggests the company will likely meet its cash-flow needs and remain a going concern. It is wise for a business owner to remain alert to his company 's current liabilities and the cash and assets that will be turned to cash within one year to meet these obligations. 1) b. Long-term liabilities are due more than a year after the balance sheet date.
• What Are Pro Forma Financial Statements Based On?
477 Words | 2 PagesWhat do pro forma financial statements show? There are various things Pro forma financial statement shows but first, let’s understand the word pro forma which means a financial statement based on projection and assumption of what the business future would be to determine what should be happening now. Pro forma financial statement can be thought of as a “Projected results for financial statements in the future, given assumptions about what will happen in the meantime” (Siegel & Yacht, 2009, p. 81).
The Importance Of Accounting Memo
1616 Words | 7 PagesAnalysis • This section is regarded as the most critical step in writing an effective accounting memo by bringing together the required facts of the research, any supporting authoritative literature, and an accountants overall evaluation before forming a conclusion. • Analysis includes information from relevant guidance, along with an accountant’s own words about how the guidance is applicable. • The memo should contain enough authoritative guidance that the user will not need to perform additional research in the Codification. • Make sure to utilize the concept known as the “guidance sandwich.”
Essay On Pro Forma
552 Words | 3 PagesIn 2002, the SEC adopted new rules and amendments to address public companies’ disclosure or release of certain financial information that is calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles. The accrual accounting is more popular and be widely used in business world because it produces more accurate and faithful financial statements that constitute better representation of actual circumstances than its main competitors. The major weakness of accrual accounting is that there is some time issue such like the time of occurred and time of recorded would probably be different and it increases the risk of financial information and the risk of correctness. Also, the accrual accounting generally cost more to operate compared with cash accounting
Inventory Valuation Analysis
1594 Words | 7 PagesI have chosen Nobes because there are more related articles and essays can be searched from the web, also the international accounting differences across the countries in accounting treatment is controversial issue nowadays. Differences reporting standard in accounting treatment across the countries can result in significantly different amounts being reported on the balance sheet and income statement. These differences will have impacts on cross country merger or acquisition and cross-border company comparison. I have chosen the inventory valuation applied under UK (IFRS) and US (US GAAP) as different valuation method applied to inventories could lead to enhance comparability between countries. Also it will have impact on the reported income
Tesco Accounting Report
1656 Words | 7 PagesAlso many companies reporting related to the state of the value added or environmental information, these are concentrated in industrial sectors. The financial statements reflect the financial position of company, financial performance and cash flows of the company, it is significant to note that the correct depiction of the impacts of transactions and other events and circumstances according to the explanations and criteria identification of assets, liabilities, income and expenses go in the same outline (Brealey,
The Importance Of Accounting In Personal Finance
748 Words | 3 PagesAccording to Averkamp (2016), “accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting information in various reports and analyses”. Therefore knowing how to carry out these tasks
Conservatism And Cost Accounting
779 Words | 4 PagesMost of them are of the view that there are a number of benefits in adopting this principle. One major explanation is that conservatism arises because it is an essential component of the efficient measures and technologies that are employed in organizations and companies (Givoly, Hayn & Natarajan, 2007). Using this explanation, conservative accounting is a mode and means for dealing with problems dealing with asymmetric information and limited liability (Sohn, 2011). Even in those cases where contracting as well as managerial accounting will be separated from accounting and reporting, most of these problems will continue to exist. The contracting measures and explanations have shown that conservatism is quite beneficial when viewed from investor perspectives.
Self Reflection In Financial Management
1051 Words | 5 PagesSelf -Reflection on Module 8.2a Financial Management Before the commencement of the sub-module 8.2, we were supposed to choice either 8.2a (Financial Management) or 8.2b (Investing Social Security Reserves), because the sub-module is divided into two. I have decided to take the sub-module 8.2a, and during online VC sessions, I have had gained some basic knowledge from this subject (Financial Management). For me, this is the first time I had chance to learn about the subject, before that I have just heard some information about financial management only from a friend who studied Accounting and working as Auditor at Association of Chartered Certified Accountants (ACCA) consultancy in Ethiopia. From the beginning I am so much eager and impressed
More about Generally Accepted Accounting Principles (GAAP)
Eagle Outfitters Financial Ratios Paper
705 Words | 3 PagesFASB Accounting Standards Codification Case Summary
254 Words | 2 PagesGgb 515 Task 1
789 Words | 4 PagesOne Stop Deca Cash Flow Statement
980 Words | 4 PagesMacy's Accounting Principles
185 Words | 1 PagesWgu Audit Task
529 Words | 3 PagesXacc/280 Week 4 Mini Case
513 Words | 3 Pages• What Are Pro Forma Financial Statements Based On?
477 Words | 2 PagesThe Importance Of Accounting Memo
1616 Words | 7 PagesEssay On Pro Forma
552 Words | 3 PagesInventory Valuation Analysis
1594 Words | 7 PagesTesco Accounting Report
1656 Words | 7 PagesThe Importance Of Accounting In Personal Finance
748 Words | 3 PagesConservatism And Cost Accounting
779 Words | 4 PagesSelf Reflection In Financial Management
1051 Words | 5 Pages