Generally Accepted Accounting Principles
Generally accepted accounting principles are generally known as GAAP. GAAP is the term which is used to define the standard framework of guidelines for the financial accounting utilized in a given jurisdiction that are commonly called as accounting standards. To ensure that financial statements are understandable to their users, a set of practices, called generally accepted principles (GAAP), has been developed to provide guidelines for financial accounting.
Although the term has several meanings in literature of accounting, perhaps this is the best definition; “Generally accepted accounting principles encompass the conventions, rules, and producers necessary to decline accepted accounting practice at a particular time.” In other words GAAP arise from wide agreement on the theory and practice of accounting at a particular time. These “principles” are not like the unchangeable laws of nature in chemistry or physics. They evolve to meet the needs of decision makers and the change as circumstances change or as better methods are developed.
Accountant use generally accepted accounting principles (GAAP) to show them in reporting and recording financial data. Generally accepted accounting principles includes a board set of principles which have been developed by the SEC or Securities and Exchange Commissions and Accounting professions. Generally accepted accounting principles is the codification of how Certified Public Accountant’s corporations and firms prepare and present their company expenses and incomes, liabilities and assets on their financial records. GAAP does not include a single accounting rule, but instead the aggregative of several rules on how account for several financial transactions.
Some of the principles of GAAP are as follows: