GAAP
公认会计原则代写 It is the common set of various standards, accounting principles, and different procedures that are issued by the financial…
1.Definition of GAAP:
It is the common set of various standards, accounting principles, and different procedures that are issued by the financial accounting standard board. In the United States, when the accountants of public companies compile the financial statements, they must follow the generally accounted principles. It is the combination of different authoritative standards that are mostly set by the policies of the boards. These principles also aim to improve the consistency, comparability, and clarity of financial information communication. It also helps to guide the accounting word according to the guidelines and general rules. GAPP also aims to regulate and standardize the methods, assumptions, and definitions used in accounting in the different industries. It covers various topics, such as materiality, balance sheet clarification, and revenue recognition. (Tuovila, 2020).
2. History and Evolution of GAAP: 公认会计原则代写
The market crash of 1929 was the reason for the generally accepted accounting principle (GAAP). The US government sought out the ways for the regulation of the practices of the publically traded companies and also for the regulation of other significant participants of the market. According to the US government, the causes of the crash were less than the above-board practices by the various publically traded companies. Therefore, as a response to this great depression, the federal government started to work with different accounting groups that are professionals because they want to establish the various standards and various practices for the fair financial reporting of the companies. Generally Accepted Accounting Principles began to be established with legislation such as the Securities Act of 1933 and the Securities Exchange Act of 1934. It has started to evolve gradually based on the various standards and concepts and it als based on the different best practices (Ross, 2020)
3. Importance of GAAP:
By using the commonly accepted practices, terms, and procedures, the GAAP can make transparent and standardized financial reporting. GAAP is vital for the business organization. It would not be easy for investors and managers to interpret financial statements without the help of general accounting principles (GAAP). It provides the methodology that is standardized to record the events and transactions that can influence the financial position of the company. One of the primary goals of GAAP is to ensure that the financial statements of the company are comparable, consistent, and complete. It makes it easy for different investors to analyses the financial statement of the company and to extract vital information that can be useful for them (DeBenedetti, n.d).
4.Core Organization behind GAAP: 公认会计原则代写
The generally accepted accounting principles (GAAP) are established and developed by the Financial Accounting Foundations (FAF) standard-setting boards and the financial accounting standard board (FASB), and the governmental accounting standard board (FASB). It is to determine how those types of financial statements are designed. These standards are collectively known as the generally accepted accounting principles (GAAP) (Tuovila, 2020).
5. Principles of GAAP:
5.1. Boundary rules:
There are four types of boundary rules such as entity, going concerned, quantitative, and periodicity
Entity:
The entity refers to something that has a separate existence. In the context of business entity is the structure of the organization having its methods, objectives, and records. In accounting, the transaction of the entity are recorded, and the financial statements for the specific entity are formed (Gornik,et.al.2020).
Periodicity:
In accounting, the periodicity refers that the accountants will accept that the complex and continuing activities of the company can be distributed and can be described in monthly, annually, and quarterly financial statements. For example, the manufacturing company involves two years in manufacturing but the different activities of the operations will be distributed and described in the quarterly financial reports of the company (Gornik,et.al.2020).
Going concerned: 公认会计原则代写
The going concern principle refers to the supposition that the entity will continue its process for its future that is predictable. It means that the entity will be required to stop its these actions and also settle its various assets according to the near term at what would be the possible very low sale prices(Gornik,et.al.2020).
Quantitate:
This analysis refers to the mathematical models to help the companies to evaluate the various data points and also intend to understand the situation. The companies use this type of analysis to expect their future outcomes. It is one of the central concepts of financial modeling (Gornik, et.al.2020).
5.2. Measurement rules:
The measurement rule of the GAAP helps the companies in the calculation of financial and economic activities in the context of hours, money, and other things. There are six types of measurement rules: historical cost, money measurement, materiality, matching, dual aspect, and realization.
Money measurement:
The money measurement refers to the GAAP principle that businesses will only record the accounting operations if stated in the monetary terms. It shows that the accounting transaction, according to this rule, focus on the quantitative information instead of the qualitative information. Therefore, the various number of items cannot be copied in the accounting record of the company ( Jenson, 2019).
Historic cost: 公认会计原则代写
The historical cost is the rule of the GAAP that refers to the measure of value that is used in accounting in which the price of the benefits on the balance sheet of the company. Is created according to the original cost or nominal cost. This method is used for the different assets in the United States under GAAP (Jenson, 2019).
Realization:
It is also known as the revenue recognition method. This method refers to the various applications of accumulations concepts that are near to the recognition of the income or the recognition of the revenue. According to this rule of GAAP, the seller must recognize the revenue when it is received (Jenson, 2019).
Matching:
The matching rules refer that any associated expense and the revenues of the company can be accepted together in the same period. Therefore, the company can record any cause and effect relationship between the expenses and revenues in the same period of time. It is a vital principle in the GAAP because it shows that the whole transaction of the company is recorded with in the same time period (Jenson, 2019)
Dual aspect:
Every transaction of the business involves the recordation system into two different accounts in the company. It is also known as a double entry of accounting. It is involved in all the frameworks of accounting to produce the various financial statements that are dependable (Jenson, 2019)
Materiality:
The materiality principle refers to the incorrect or loss information in the financial statements of the company that have influenced the decision making of the company’s users. This principle also sometimes refers to the net effect on the profits that are reported(Zayyad, et.al, 2019).
5.3 Ethical Rules: 公认会计原则代写
There are four types of ethical rules, such as objectivity, prudence, and relevance, and consistency.
Prudence:
Sometimes the various accounting events and accounting transactions are unclear. Therefore, companies have to record them in time. The companies must make different estimations to counter considerable doubts. It is one of the fundamental GAAP principles that ensure that the income and assets of the company are not overstated(Jenson, 2019).
Consistency:
Consistency refers to the principle that companies accept the method or the accounting period and continue to follow it in the future. Any change in the method and the accounting principle is the new version (Zayyad, et.al, 2019).
Objectivity:
The objectivity is the rule of GAAP that refers to the concept that the financial statements of the companies are based on the solid indication. This principle aims to retain the management of the company and its accounting department to make the financial statements that can be biased because of the suggestions of the company (Zayyad, et.al, 2019).
Relevance:
Relevance is the principle that refers to the influence of various information that is produced by the accounting system on the decision making of the users that are checking the data. It can also include the different content of data and its timeline that can affect the decision-making process (Zayyad, et.al, 2019).
4. Alternatives to GAAP: 公认会计原则代写
The generally accounting principle (GAAP) can be useful for many small private companies. Most of the companies need to base the financial statements of their business on the GAAP. The companies do so to satisfy the needs of their investors and the lenders of the business. Besides, all these GAAP is also expensive and also complex for many small businesses and companies to embrace the wholesale( Hoffelder,2012).
There are some simple alternatives to GAAP. That uses another comprehensive base of the accounting. The alternative includes a regulatory basis, cash or modified cash basis, income-tax basis, and a definite set of criteria. These alternatives can be applied to all material that is included in the financial statements of the company. The small firms can also go for the streamlined version of international financial reporting standards (IFRS) introduced three years ago. It allows the firms to make financial statements incredible, consistent, and in a cost-effective way ( Hoffelder,2012).
5. Benefits of GAAP:
Comparability: It improves the comparability of the financial statements with statement presentation and different standardization accounting methods. The companies can also compare their financial statements with the different periods of the company and also with the financial statements of other similar companies or the competitors in the industry. The investors are interested in publically traded companies; therefore, their financial statements are available to the investors, which gives them the business opportunity to compare their financial statements with the issuer’s statements (Davore,2020).
Consistency: The companies that follow the GAAP also follow the same type of accounting principles. These same accounting principles are from the one reporting period to the next recording period. It promotes the accuracy of the financial statements. It is much easier for the stakeholders to evaluate the financial data of the company by observing the consistency principle and GAAP(Davore,2020).
6. Limitations: 公认会计原则代写
No Doubt that GAAP helps the companies to avoid inaccurate financial statements and also guide the companies to prepare clear and accurate financial data. Despite all these, GAAP also has some limitations. We are discussing some of the limitations that can arise when companies use GAAP.
- Not Global:
One of the limitations of the generally accepted accounting principle is that it is not a globally accepted principle. The companies running their operations internationally or the companies that will be globalized can face various challenges because of this limitation of GAAP. Outside the United States, the different companies use international financial reporting to get accurate and precise results (Dorward,2017).
- One size fits all:
The diversity is seen among the various companies. GAAP refers to one size fit, all that creates the challenges for the diversified organizations and companies in specific industries and even for small businesses. For example, GAAP can be too complicated for companies running their business operations at a lower level (Dorward,2017).
- Wait for new standards:
The policy board of GAAP goes through the various deliberations and also by the long process to introduce or to set the latest principles and standards in the generally accepted accounting principle (GAAP). Therefore, the companies using GAAP can be influenced negatively because they must have to wait for the GAAP standard to be approved before their implementation (Dorward,2017).
7. Conclusion: 公认会计原则代写
In the end, we can conclude that generally accepted accounting principle (GAAP) is the typical set of various standards, accounting principles, and different procedures that are issued by the financial accounting standard board. The market crash of 1929 was the reason for the generally accepted accounting principle (GAAP). The US government sought out the ways for the regulation of the practices of the publically traded companies and also for the regulation of other significant participants of the market. By using the commonly accepted practices, terms, and procedures, the GAAP can make transparent and standardized financial reporting. GAAP is vital for the business organization. No Doubt that GAAP helps the companies to avoid inaccurate financial statements and also guide the companies to prepare clear and accurate financial data. Despite all these, GAAP also has some limitations.
References:
Dorward,L. (2017). GAAP Limitations. Bizfluent.
DeBenedetti, J. (n.d). How GAAP Is Important for Business Organizations.
Davore,J. (2020). What Are the Benefits of the GAAP?. Small Business – Chron.com
Hoffelder,K. (2012). Mind the GAAP Alternatives.
Gornik,T.et.al. (2020) “Continued Impact of International Financial Reporting Standards on U.S. Generally Accepted Accounting Principles,” Journal of Global Awareness”.
Jenson,H.(2019). Exploring the Financial and Accounting Reporting Standards and Principles under U.S. GAAP.
Zayyad, A. et.al. (2019). The impact of accounting reform on accounting quality: Evidence from Nigeria, Journal of International Financial Management & Accounting.
Ross, S.(2020). When and Why Was GAAP First Established?
Tuovila, A.(2020). Generally Accepted Accounting Principles (GAAP)
