GAAP, generally accepted accounting principles, are the rules for preparing the financial statements. There are specialized professionals FASB, SEC, AAA, FEI, IMA, AIMR and others for developing GAAP. There are 13 principles for preparing Financial Statement.
Business Entity Principle requires business to be separated from owner of the business. Going Concern principles requires the business to assume that the business will for long time. Revenue Recognition Principle considers business’s actual revenue for a accounting cycle. Objectivity principle requires evidence for everything.
Financial Statements show the financial condition, profitability, asset, liability and owners equity of a business. And help to compare with previous year or with other company. Income Statement gives the annual result of business transaction. Statement of Retained Earnings shows the company’s earnings after dividend. Balance Sheet shows financial condition .Statement of owner’s equity represents the equity of the owner’s .Statement of cash flows shows the cash flow of the company over the year. Return on Equity ratio represents the return on the owners investment in company.
Introduction & Objective of the Report
1. Introduction: Report is a self-explanatory statement of facts relating to a specific subject and serves the purpose of providing information for decision making and follow up actions. It is a systematic presentation of ascertained facts about a specific event / subject. . Report is a summary of findings and recommendations about a particular matter / problem. Report is for the guidance of higher authorities including company executives and directors. Report facilitates timely decision and follow up measures. Our report is on GAAP and Financial statement. The objectives of the report are shown below.
1.2Objective Of the Report:
•To know the ways of report writing
•To learn the format of report writing
•To gather the practical knowledge
•To learn about GAAP (Generally Accepted Accounting Principles)
•To know the accounting principles
•To learn group work
•To know Financial Statements
•To learn accounting equation
•To learn solving problems of Accounting
2.1GAAP: GAAP stands for generally accepted accounting principles.
Figure 1: GAAP
GAAP is set of accounting principles, standards and procedures that are used compiling financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. GAAP is adopted as a guide for measuring and reporting the financial condition and activities for business. GAAP are imposed on companies so that investors have a minimum level of consistency in the financial statements they use when analyzing companies for investment purposes. GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements. GAAP is only a set of standards. There is plenty of room within GAAP for unscrupulous accountants to distort figures.
2.2History Of GAAP: Prior to 1930’s, GAAP were developed through a common usage .A practice was considered suitable if it was acceptable to most accountants .As the accounting profession grew and the world’s business become more complex , many people...