WHAT IS GAAP?

Waleed Sami
22nd April, 2012

Course Title: Course Code: Program: Semester:

Financial Accounting ACC351 MBA 2.5 Years II

Lecturer: Checked by: Date:

Mr. Waqqas ______________________ / /2012

MAS EDUCATION CENTRE

[WALEED SAMI] April 22, 2012

What is GAAP?
Generally accepted accounting principles (GAAP) is the outlined, guidelines and most important rules of standards format for recording & reporting all the financial transaction in any organizations. In extra generally accepted accounting principles (GAAP) is a set of rules, conventions, standards and procedures, established by the financial accounting standards board for recording and reporting financial information.

Implications of GAAP in Business Convention

The ordinary locate of accounting ethics, principles and dealings that companies use to accumulate their financial statements. Generally Accepted Accounting Principles (GAAP) is a mixture of dependable values (put by policy boards) and basically the usually traditional conduct of recording and reporting accounting information. While you have something to do with the financial reporting of a company or government being, you should recognize the principles of GAAP. Generally accepted accounting principles (GAAP) is implemented through measurement principles and revelation principles. Measurement principles recognize and decide the timing and basis of items that enter the accounting cycle and impact the financial statements, such as the period in which transactions will be recorded. Disclosure principles determine what exact numbers and other information are essential to be presented in financial statements. When arranging financial statements prepared using GAAP, most American companies and other business unites use a lot of rules of how to report business transactions or dealings based
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[WALEED SAMI] April 22, 2012 upon the different GAAP rules. This affords for uniformity in the reporting of companies and businesses so that financial analysts, Banks, Shareholders and the SEC can have all reporting companies preparing their financial statements using the same rules and reporting procedures. There are general rules and impressions that administer the ground of accounting. These general rules referred to as basic accounting principles and guidelines form the foundation on which more exhaustive, complex, and legalistic accounting rules are based. For example, the Financial Accounting Standards Board (FASB) uses the basic accounting principles and guidelines as a basis for their own detailed and comprehensive set of accounting rules and standards Although it is not written in law, the U.S. Securities and Exchange Commission (SEC) entail publicly traded companies and other regulated companies to follow GAAP for financial reporting. Although slighter companies are not required to use GAAP, there are confident situations, such as obtaining credit or seeking investors, which require, by contract, those companies to also follow GAAP when preparing their financial statements reporting, The rules and procedures for reporting under GAAP are complex and have developed over a long period of time. Presently there are more than 150 "pronouncements" as to how to account for different types of transactions, ranging from how to report standard income from the sale of goods, and its connected inventory values, to accounting for inducement stock option distributions. By using reliable principles, all companies reporting below GAAP report these transactions on their financial statements in a dependable way.

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