GAAP Generally Accepted Accounting Principles governed by

Think of the building of a large project such as a dam. If it is a cash transaction, the revenue is recorded when the sale is completed and the cash received. Usually, this just means recording revenue when the bill for it is sent to the customer. The revenue recognition convention provides that revenue be taken into the accounts (recognized) at the time the transaction is completed. These fiscal periods are of equal length, and are used when measuring the financial progress of a business. The time period concept provides that accounting take place over specific time periods known as fiscal periods. The source document shows the amount agreed to by the buyer and the seller, who are usually independent and unrelated to each other. The source document for a transaction is almost always the best objective evidence available. Simply put, this means that accounting entries will be based on fact and not on personal opinion or feelings. Objective evidence means that different people looking at the evidence will arrive at the same values for the transaction.

The objectivity principle states that accounting will be recorded on the basis of objective evidence. They should do so in a way that neither overstates nor understates the affairs of the business or the results of operation. Accountants are required in their work to make evaluations and estimates, to deliver opinions, and to select procedures. The principle of conservatism provides that accounting for a business should be fair and reasonable. The values of such assets often cannot be determined until they are actually sold. When a company is going out of business, the values of the assets usually suffer because they have to be sold under unfavourable circumstances. In that case, the envelopes would be difficult to sell because the company's name is on them. This would not be the case if the company were going out of business. For example, a supply of envelopes with the company's name printed on them would be valued at their cost. The values of the assets belonging to a business that is alive and well are straightforward.

The continuing concern concept assumes that a business will continue to operate, unless it is known that such is not the case. Also, when transactions of the business are recorded, any personal expenditures of the owner are charged to the owner and are not allowed to affect the operating results of the business. The balance sheet of the business must reflect the financial position of the business alone. This means that the owner of a business should not place any personal assets on the business balance sheet. The business entity concept provides that the accounting for a business or organization be kept separate from the personal affairs of its owner, or from any other business or organization.

In certain instances particular types of accountants that deviate from these principles can be held liable. It is based on the following core principles. GAAP is an international convention of good accounting practices. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (G.A.A.P)

GAAP Generally Accepted Accounting Principles governed by