Basic Accounting Concepts and Business Structures
ACC/537 FINANCIAL ACCOUNTING
All businesses has a obligated task to prepare financial statements that shows the performance of the business at the end of a accounting period. Accounting standards regulation is important because it helps to ensure that companies are transparent in preparation of financial statements which reflects the true results of the company’s outcome. If there are no regulations for preparing financial statements, anyone can prepare and present the financial statements to the public without considering credibility.
According to Financial Accounting Standard Board (FASB) the hierarchy of Generally Accepted Accounting Principles (GAAP) governs what constitutes GAAP for reporting entities. It lists the priority sequence of pronouncements to which an entity should look for accounting and financial reporting authoritative guidance. The sources of accounting principles are generally accepted and categorized in different levels, and consist of standards, interpretations, bulletin positions, and guidelines. Level A is the highest level in financial reporting. This level officially establishes accounting principles, standards, and interpretations. Level B includes Technical Bulletins, Industry Audits, and Accounting Guides. Level C includes technical releases of the Accounting and Auditing Policy Committees. Level D is the least authoritative, including implementation guides along with answering questions.
In order for accounting information to be useful in satisfying the needs of various user groups, it must be understandable, relevant, consistent, comparable, reliable, and objective. Understandability is the expression of clarity, presenting accounting information in a way that is understandable to users generally assumed to have some reasonable knowledge of business and economic worlds. Relevance in the accounting...
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