assumptions underlying generally accepted accounting principles gaap

Publicly traded companies (those that offer their shares for sale on exchanges in the United States) have the reporting of their financial operations regulated by the Securities and Exchange Commission (SEC). International accounting rules are called International Financial Reporting Standards (IFRS). If US accounting rules are followed, the accounting rules are called US GAAP. In Introduction to Financial Statements, you learned that the Financial Accounting Standards Board (FASB) is an independent, nonprofit organization that sets the standards for financial accounting and reporting, including generally accepted accounting principles (GAAP), for both public- and private-sector businesses in the United States.Īs you may also recall, GAAP are the concepts, standards, and rules that guide the preparation and presentation of financial statements. Accounting Principles, Assumptions, and Concepts We go into much more detail in The Adjustment Process and Completing the Accounting Cycle. This chapter explains the relationship between financial statements and several steps in the accounting process. These statements are discussed in detail in Introduction to Financial Statements.

A set of financial statements includes the income statement, statement of owner’s equity, balance sheet, and statement of cash flows. Financial statements are created with this purpose in mind. If you want to start your own business, you need to maintain detailed and accurate records of business performance in order for you, your investors, and your lenders, to make informed decisions about the future of your company.

Assumptions underlying generally accepted accounting principles gaap