July 25, 2010
Basic accounting concepts and business structures go hand-in-hand. Usually the business structure will determine the type of accounting concepts it will use. Generally accepted accounting principles (GAAP) are needed for effective accounting information.
Basic Accounting Concepts and Business Structures
Basic accounting concepts and business structures are important to a business’s success. Using generally accepted accounting principles (GAAP) brings a standard to financial statements. There must also be effective accounting information. A company can choose to use cash basis accounting or accrual basis accounting. Generally, GAAP does not accept cash basis accounting. A company can decide what type of business they want to operate. Sometimes making the best decisions for the business can mean the difference between success and failure. Generally Accepted Accounting Principles (GAAP)
Generally accepted accounting principles (GAAP) are a set of standards generally accepted and universally practiced in accounting. “The term ‘generally accepted’ means either that an authoritative accounting rule-making body has established a principle of reporting in a given area or that over time a given practice has been accepted as appropriate because of its universal application” (Kieso, Weygandt, & Warfield, 2007). Four organizations that contribute to forming GAAPs in the United States are the Securities and Exchange Commission (SEC), American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB). Sources of GAAP
The major sources of GAAP are FASB Standards, Interpretations, and Staff Positions; Accounting Principles Board (APB) Opinions; and AICPA Accounting Research Bulletins. FASB standards are considered GAAP. Interpretations that...