accounting GAAPS

Business Entity

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 the 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.

Revenue Recognition Convention

Revenue should be taken into account at the time the transaction is completed.

Matching Principle

Each expense related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn.

Time Period

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

Accounting for purchases must be recorded at their cost price.

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.

Materiality principle

Accountants are required to use GAAPs except when it would be expensive or difficult and when it makes no real difference if the rules are ignored.

Full Disclosure

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