applications of gaap

cost principle

 the accounting for purchases must be at the cost price to the purchaser. (ex. if a piece of equipment was purchased for 200k 12 years ago, it is required to be reported as costing $200k.)

principle of conservatism

primary application: revenue is only recognized when it is earned

objectivity principle

accounting must be recorded on the basis of solid evidence (source documents). (ex. must have a source document to account for it

matching principle

related revenues and expenses should be recorded for the same period. (ex. revenue recognition principle, etc.)

time period concept

fiscal period that a business uses must be consistent and equal, and has to be a maximum of one year.