Basic Accounting Principles and Business Structure

Topics: Corporation, Financial Accounting Standards Board, Limited liability company Pages: 3 (721 words) Published: May 21, 2012
Basic Accounting Concepts and Business Structures

Danny Silvio

ACC/537

10/10/11
Professor

Basic Accounting Concepts and Business Structures

Generally Accepted Accounting Principles
The sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements are prepared by the Financial Accounting Standards Board (FASB). The standard categorizes the major sources of GAAP as being FASB Standards, Interpretations and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins (Kiesco, Weygandt, & Warfield, Chap. 1, 2007). Chapter one describes this bottom portion of the hierarchy of GAAP as Category (A), being the most authoritative. When a specific accounting transaction occurs that these documents do not cover, companies go to the next level, which according to Kiesco, Weygandt, and Warfield’s  (2007) illustration are Category B being FASB Technical Bulletins (which are no longer issued); AICPA Industry Audit and Accounting Guides; and AICPA Statements of Position. Although there is no single reference source for GAAP, there is a hierarchy established by the AICPA. At the foundation of that hierarchy are the principles established by the FASB and its predecessors, the APB and the AICPA Committee on Accounting Procedure. From that foundation, the hierarchy formulates a "pecking order" for all the rules and procedures that are incorporated in the preparation of financial statements and that have come to be known as GAAP. The GAAP hierarchy includes four successive categories (A-D), each of which establishes a different level of authority. If there is a conflict between accounting principles relevant to the circumstances from one or more sources in Categories A, B, C, or D, the treatment specified by the source in the higher category is then followed. In other words, Categories A through D of the hierarchy descend in authority...

References: Kiesco, D. E., Weygandt, J. J., & Warfield, t. d. (2007). Financial Accounting and Accounting Standards. Retrieved from University of Phoenix eBook Collection database.
eNotes. (2011). Retrieved from http://www.enotes.com/business-finance-encyclopedia/generally-accepted-accounting-principles
Business Structures. (2011). Retrieved from http://www.irs.gov/businesses/small/article/0,,id=98359,00.html
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Basic Accounting Essay
  • Basic Accounting Concepts and Business Structures Essay
  • Essay on Basic Accounting Concepts and Business Structures
  • Explaining Basic Accounting Concepts and Business Structures Essay
  • Essay on Explaining Basic Accounting Concepts and Business Structures
  • Assignment 2
  • Basic Accounting Principles and Guidelines Essay
  • Essay about Basic Accounting Principles And Guidelines

Become a StudyMode Member

Sign Up - It's Free