GENERALLYACCEPTED ACCOUNTING PRINCIPLES GAAP

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GENERALLYACCEPTED ACCOUNTING PRINCIPLESGAAP
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1. ENTITY CONCEPT

• An accounting entity is an organisation that
  stands apart from other organisations or
  individuals as a separate economic unit
• Company vs shareholder

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2. RELIABILITY

• Reliable information
• Data supported by convincing evidence
• Verifiable by independent accountants

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3. Going Concern Principle

• Assumes that ordinarily an entity persists
  indefinitely.
• Companys existing resources will be used to
  fulfill business needs rather than be sold in
  tomorrows real estate or machinery market.
• Opposite to Liquidation

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4. Materiality Concept

• What to include in financial statements
• An item should be included in the financial
  statements if its omission misleads the the
  reader of the financial statement.
• Fixed assets (office stationery) vs Expenses

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Stable Monetary Unit

• All costs, assets etc are onverted to monetary
  units
• Monetary unit should not be changed over time.

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Conservatism

• Expense Recognition
• Revenue Recognition

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Stable Accounting Policies

• Inventory Valuation Method
• LIFO FIFO WAC
• Depreciation methods
• Straight Line Written Down Value etc

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Historical Value

• Normally no revaluation of Assets