Accounting GAAPs

What does GAAP stand for?

Generally Accepted Accounting Principles

What are GAAPs?

A set of accounting standards and guidelines used for financial reporting.

Business Entity Concept

No personal assets or liabilities on financial statements

Cost Principle

When an asset is bought, it is written as the price it was paid for

Going Concern Principle

Assuming the business intends to keep operating when looking at financial statements

Revenue Recognition Principle

Revenue is recorded when it is earned, even if it has not been paid for yet

Time Period Concept

Accounting must take place over specific fiscal periods that are equal length and are used when analyzing the financial progress of a business

Matching Principle

1. Must record the proper amount of revenue in the proper fiscal period

2. Every expense that helped earn the revenue must be recorded in the same fiscal period as the revenue

Principle of Conservatism

Assets should be neither overstated nor understated at the end of a time period

Objectivity Principle

A business must have clear, verifiable evidence of transactions

Transactions must be record on fact, not on personal opinion or gut feelings