Zane F. Garrison
Principles of Accounting
Module 1 Case Assignment
Coordinator Professor: Dr. Annette Hebble
Core Faculty: Dr. Wm. Dennis Huber
The purpose of this paper is to discuss Generally Accepted Accounting Principles (GAAP) and the idea of Current Assets and Liabilities versus Non-Current Items. I will expand on their definitions and explain why these concepts are important to financial statements. I will also discuss financial statements from two companies: Toyota and Western Digital. My discussion will include how Net Income is useful to the companies and if Cash from Operating Activities are more important. I will make one prediction and conclusion about each company based on the information in their financial statements.
First let’s discuss Generally Accepted Accounting Principles (GAAP). Investopedia.com defines GAAP as, “The common set of accounting principles, standards and procedures. GAAP is a combination of authoritative standards (set by policy boards) and the accepted ways of doing accounting.” What does this mean in the world of accounting? Accountants make judgments about how to record business transactions in one of two manners. They base their decisions on the financial objectives of their company or they will turn to GAAP to steer their decisions. Keep in mind, GAAP are not rules and procedures that are set in stone. These are guidelines and procedures that have evolved over time to help govern how financial statements are prepared. Who sets these rules and procedures? Private sector bodies set these rules and procedures. The main influence to GAAP is the Financial Accounting Standards Board or FASB. There are other bodies outside the FASB that provide guidance to GAAP as well. The American Institute of Certified Public Accountants and the Securities and Exchange Commission also provide guidance about acceptable accounting practices. There are also standards that are used to... [continues]
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