An Overview of Accounting Principles

If each person involved in the process of accounting followed their own system or the system at all, there is no way to really know whether the company is profitable or not. Most companies follow what are the Generally Accepted Accounting Principles, or GAAP mentioned, and there are thick books in libraries and bookstores devoted to just this one topic. If a company can otherwise provided, each reading a statement to make the assumption that the company uses GAAP.

If GAAP are not the principles used in preparing the financial statements, the company must make it clear that other forms of accounting and they are bound to avoid, with a company in the financial statements that people they might mislead investigated.

GAAP is the gold standard for the preparation of financial statements. Not disclose that they were used in addition to GAAP, the company legally responsible for making all the data that is misleading or false principle. These principles have to improve, for several decades and has been effective and the method of accounting for corporate financial reporting system to be managed. Different principles have for different types of business entities, as has been established for-profit and not-for-profit companies, governments and other companies.

GAAP is not cut and dried, however. They are guidelines and are therefore often open to interpretation. Estimates must be made at the time, and they require a good faith effort to accuracy. You have certainly heard the phrase, “creative accounting” and that is when a company the envelope a little (or much) to make their business look more profitable than printing it is indeed possible. Also calls massaging figures. This could boil out of control and rapidly turn into accounting fraud also referred to the books. The results of these practices can destroy and damage hundreds and thousands of lives.

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