GAAP

Double Entry

Every transaction is recorded twice (debit + credit)

Entity Principle

Financial statements report business only, not owners/investors

Time Principle

Debts paid within 1 year or one full business cycle (whichever is longer)

Conservatism

Resolve uncertainties in least favorable way to avoid overstating assets/income

Going Concern

Assume the business will continue indefinitely

Historical Cost

Report assets at original (book) value

Objectivity

Use verifiable, unbiased evidence to record transactions

Stable Monetary Unit

Assume the value of money doesn’t change year-to-year

Standard Setters

FASB (creator of GAAP), AICPA, SEC, IRS — all help shape rules

SEC

Enforces public company reporting; encourages private standard-setting

Capital Allocation

Process of deciding where money goes, at what cost

Expectation Gap

Difference between what the public thinks accountants do vs what they’re actually responsible for

SOX (Sarbanes-Oxley)

2002 federal law to regulate auditing + enforce financial protocols across public/private firms

Matching Principle

Expenses should be recognized in the same period as the revenues they help generate.