GAAPs - Generally Accepted Accounting Principles

Business Entity Concept

The accounting for a business or organization is kept separate from the personal affairs of its owner, other business, or organization

Continuing Concern Concept

Assumes that a business will continue to operate unless it is known otherwise.

Principle of Conservatism

The accounting for a business should be fair and reasonable. The results should not overstate nor understate the affairs of its business.

Objectivity Principle

The accounting will be recorded on objective evidence. Different people looking at the evidence will arrive at the same value for the transaction. This evidence is called a source document (i.e. receipt, invoice, bill, etc)

Revenue Recognition Convention

Revenue is recorded when it is earned, not necessarily when cash changes hands.

Time Period Concept

Accounting takes place over specific time periods known as fiscal periods. The fiscal periods should be of equal length when used to measure the financial progress of the business

Cost Principle

Items are recorded in the books at the historical cost paid by the purchaser and do not change from their original value

Consistency Principle

Accountants should apply the same methods and procedures from period to period. When changes are made, they must be explained clearly on the financial statements. This allows for comparability from period to period.

Materiality Principle

Accountants must use GAAPs except when doing so would be prohibitively expensive, difficult, and would make little significant difference in the final reported results of the business

Full Disclosure Principle

Any and all information that affects the full understanding of a company's financial statements must be included with the financial statements