GAAP: Generally Accepted Accounting Principles BASIC INFORMATION AND TUTORIALS

What is GAAP (Generally Accepted Accounting Principles)?

GAAP SIMPLIFIED AND EXPLAINED!!!

Generally Accepted Accounting Principles (GAAP) 

A set of rules, conventions, standards, and procedures established by the Financial Accounting Standards Board for reporting financial information.

The standard format for recording and reporting financial transactions is outlined in guidelines, or rules, called Generally Accepted Accounting Principles (GAAP). These guidelines are published by the accounting profession (with some gentle help from the U.S. government). 

They are intended to be the foundation upon which report readers can gauge a company’s progress, compare one company or one accounting period with another, and generally judge the financial effectiveness of its management efforts.

As we’ve seen, it doesn’t always work out that way, but that’s not necessarily because the rules are flawed. The job of creating comparable accounting and reporting standards for businesses as widely varied as those operating today can be a daunting task for the folks who set the standards. 

The objective of each accounting rule is to record a transaction so that it makes economic sense for the company and for readers of the company’s reports. Yet to achieve that objective, accountants in two dissimilar companies might need to record the same transaction differently you understand how to read and use these primary financial statements, prepared in accordance with GAAP.

You Don’t Get What You Don’t Ask For

Some accounting departments produce reports that they never distribute outside their department, because no one has ever asked for them.

These reports, perhaps produced as part of a standard computerized process or to serve a limited purpose in Accounting, might contain information you have been trying to collect on the back of an envelope for months. 

If they don’t know you want it, they’re not likely to go looking for you when it’s printed.Ask what kinds of reports are produced that don’t get distributed, just in case there is a gem hidden in that file cabinet. 

Of course, this also applies to reports that aren’t printed but are accessible through your computer network.