GAAP Terms

Accural Basis

Record Rec/ Exp when incurred, not when cash recieved

Cash Basis

Record Rev/Exp only when cash received, used by IRS

Economic Entity

Keeping personal and business finances separate

Comparability

Different businesses use same principles for easy comparison by investors

Conservatism

Never overestimate Rev/Assets, Never underestimate Exp/ Liabilities

Consistency

Same business must use same principles year to year

Expense Recognition

Record expense when expense happens or is incurred

Fair Value

Current Market value for an item

Full Disclosure

If event can’t be recorded must be in notes, any info that can influence investors

Going Concern

Assume business will continue indefinitely

Historical Cost

Record assets at what business paid/gave up no other value matters

Matching Principle

Compare Rev earned to Exp incurred in same fiscal period to determine NI

Materiality

Data that is important and would influence a decision maker must be recorded

Objective Evidence

Must have proof of recorded transaction

Relevance

Data makes a difference to decision makers

Reliability

Data is free of error or bias, can be trusted

Revenue Recognition

Record Rev when it is earned, not when cash is received

Stable Dollar

Inflation ignored when presenting Financial data and statements

Timeliness

Present the financial info timely so it’s still useful

Understandability

Present financial data so tht a reasonable person can comprehend

Unit of Measure

Record transactions must be expressed in money