Gaap

Satisfactory Essays
GAAP (USA)
To achieve basic objectives and implement fundamental qualities GAAP has four basic assumptions, four basic principles, and four basic constraints.

Assumptions

• Accounting Entity: assumes that the business is separate from its owners or other businesses. Revenue and expense should be kept separate from personal expenses. • Going Concern: assumes that the business will be in operation indefinitely. This validates the methods of asset capitalization, depreciation, and amortization. Only when liquidation is certain this assumption is not applicable. The business will continue to exist in the unforeseeable future. • Monetary Unit principle: assumes a stable currency is going to be the unit of record. The FASB accepts the nominal value of the US Dollar as the monetary unit of record unadjusted for inflation. • The Time-period principle implies that the economic activities of an enterprise can be divided into artificial time periods.

Principles

• Historical cost principle requires companies to account and report based on acquisition costs rather than fair market value for most assets and liabilities. This principle provides information that is reliable (removing opportunity to provide subjective and potentially biased market values), but not very relevant. Thus there is a trend to use fair values. Most debts and securities are now reported at market values. • Revenue recognition principle requires companies to record when revenue is (1) realized or realizable and (2) earned, not when cash is received. This way of accounting is called accrual basis accounting. • Matching principle. Expenses have to be matched with revenues as long as it is reasonable to do so. Expenses are recognized not when the work is performed, or when a product is produced, but when the work or the product actually makes its contribution to revenue. Only if no connection with revenue can be established, cost may be charged as expenses to the

You May Also Find These Documents Helpful

  • Better Essays

    Gaap

    • 1251 Words
    • 6 Pages

    Generally Accepted Accounting Principles (GAAP) in Health Organizations Cherilynne Dator HCS|571 March 16, 2013 Tamica Lewis Generally Accepted Accounting Principles (GAAP) in Health Organizations The increasing pressure of the cost in providing health care services to the public and the inflation in the health sector that has resulted in inflated costs of providing medical and clinical health care has prompted health providers and nurse managers…

    • 1251 Words
    • 6 Pages
    Better Essays
  • Good Essays

    computer distributer and hardware manufacturing company and the accounts are prepared according to the Generally Accepted Accounting Principles (GAAP). By comparison, Hartcourt Companies, Inc. is a Chinese distributor of computer hardware based in Shanghai and its accounts are prepared according to the accounting practices of the PRC (People’s Republic of China) GAAP. The International Accounting Standards Committee (IASC) that came into existence in 1973 was the result of accounting bodies from all major…

    • 875 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Big Gaap/Little Gaap

    • 380 Words
    • 2 Pages

    In the case “Big GAAP/Little GAAP”, we can see that some information is better provided in the notes. For example, the bank may not be aware that Forthwright Co. is in a strained financial position now because the financial statements do not show. The accounting profession has adopted a full disclosure principle that calls for financial reporting of any financial facts that are significant enough to influence the judgment of a reader. In this situation, several issues are left out of the reports…

    • 380 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Gaap

    • 960 Words
    • 4 Pages

    Generally Accepted Accounting Principles Generally accepted accounting principles is a set of broad guidelines, rules, and requirements followed by financial preparers’ used in preparing an organization’s financial statements, (Cleverley, Song, & Cleverley, 2011). Health care organizations financial statements are the key tools in presenting and projecting current and future economic viability, (Finkler, Kovner, & Jones, 2007). The financial prepared by organization’s are as follows:…

    • 960 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    Gaap

    • 335 Words
    • 2 Pages

    GAAP – This is the General Accepted Accounting Principles, it is the basic principles of accounting - http://www.investopedia.com/terms/g/gaap.asp Basic Accounting Formula- means that all balances and ledgers must match at all times. If it does not then something was entered wrong in a ledger -http://www.accountingtools.com/basic-accounting-formula Transaction T account – A term used for double entry book keeping, a ledger with 2 separate lines separating debits and credits -http://www.investopedia…

    • 335 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Us Gaap and French Gaap

    • 4135 Words
    • 17 Pages

    Implementing IFRS Extract from: IFRS compared with US GAAP and French GAAP Assurance Services The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without…

    • 4135 Words
    • 17 Pages
    Powerful Essays
  • Better Essays

    Gaap

    • 4788 Words
    • 20 Pages

    What is the prudence concept in accounting? Under the prudence concept, you should not overestimate the amount of revenues that you record, nor underestimate the expenses. You should also be conservative in recording the amount of assets, and not underestimate liabilities. Another way of looking at prudence is to only record a revenue transaction or an asset when it is certain, and to record an expense transaction or liability when it is probable. Another aspect of the prudence concept is that you…

    • 4788 Words
    • 20 Pages
    Better Essays
  • Better Essays

    IFRS TO GAAP

    • 814 Words
    • 3 Pages

    Comparing IFRS to GAAP Craig Ronquillo ACC/291 8 December, 2014 Joseph Bailey Comparing IFRS to GAAP I will be comparing IFRS to GAAP, and be discussing many ways these two get along with each other and see what they do differently as well, they both have their ways of doing things which are easier but sometime even harder. IFRS 8-1: What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed…

    • 814 Words
    • 3 Pages
    Better Essays
  • Good Essays

    Japan Gaap

    • 597 Words
    • 3 Pages

    Date: November 2nd 2011 Subject: Japanese accounting practices JAPANSE GAAP Japan in the year 2010 had a GDP of 4.31 trillion dollars making them the 4th largest in the world 1. With this being said it is important that other countries doing business in the nation have a strong knowledge of their accounting practices. Japanese accounting practices have been going through some major changes over the past 10 years. In 2001 Financial Accounting Standards Foundation (FASF) was formed as well…

    • 597 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    GAAP

    • 269 Words
    • 1 Page

    Failure of technology or inability to effectively meet the demands for a fully operational electronic health record, Removal of tax exemption/elimination of nonprofit status Describe two controllable financial risks for health care service managers. How might those risks be avoided or abated? Fraud and abuse are two controllable financial risk. “Fraud consists of intentional acts of deception”, (Clevery et. al, 2011). Any person found guilty of health care fraud faces imprisonment and substantial…

    • 269 Words
    • 1 Page
    Satisfactory Essays