GAAPs

GAAPs: provide a set of consistent rules used by all accountants to prepare financial statements: balance sheet, income statements, etc

  • The purpose of Accounting: is to provide financial information for decision-making.

  • The Business Entity Concept: Each business is considered a separate unit or entity. For accounting, the financial data for a business must be kept separate from the owner’s personal financial data.

  • The Cost Principle: Assets are shown on the balance sheet at the cost of their acquisition.

  • The Fair Value Principle – International Financial Reporting Standards: This principles uses the current fair market value of the assets for the financial reports

The following are the accounting key concepts:

  • The purpose of Accounting is to provide financial information for decision-making.

  • The Liquidity order is the order in which current assets are listed on the balance sheet. It is the order in which those assets can be converted into cash.

  • The Maturity date governs the order in which liabilities are listed on the balance sheet. It is the order in which debts are to be repaid, with the soonest repayments listed first.

  • Codes of ethics: The conduct of guiding accounting professionals, the law, professional standards, and accounting standards.

  1. In Canada, the Accounting Standards Board determines: the accounting standards.

  2. Internationally, the International Accounting Standards Board determines: accounting standards.

  3. In Canada, public companies must follow the: International Financial Reporting Standards.

  4. In Canada, private businesses and not-for-profit organizations may choose to use either the: Accounting Standards for Private Enterprises or the International Financial Reporting Standards

  5. The Accounting Standards for Private Enterprises are based on: the previously used GAAPs.