Essay on Generally Accepted Accounting Principles

Essay on Generally Accepted Accounting Principles

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Generally Accepted Accounting Principles (US GAAP) are a set of rules for accounting used to prepare and standardize the reporting of financial statements, such as balance sheets, income statements, and cash flow statements. The U.S. Securities and Exchange Commission (SEC) impose these rules on publicly traded and some privately traded companies located within the United States' borders. Although, GAAP is not written into law, the Financial Accounting Standards Board (FASB) sets GAAP. US GAAP designed to make financial statements useful to creditors, investors, and shareholders, providing insight into the financial stability of a company. Broken into two principles measurement and disclosure that focus on the following areas: the measurement of economic activity; the time when such measurements are to be made and recorded; the disclosures surrounding this activity; and the preparation and presentation of summarized economic information in financial statements. (Paul, 2008) US GAAP importance stems from the need of standardize financial statements, without a standard format, companies could withhold information of financial hardships from investors, creditors, and shareholders. Furthermore, ensures financial statements are comparable and understandable. Defining reasoning for US GAAP to govern how transactions are structured and how legal instruments are drafted. (Deming, 2005)
International Financial Reporting Standards (IFRS),created from International Accounting Standards in 2005, performs the same task as US GAAP, but for international business, that spans borders. International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are unders...


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...://wiki.fool.com/The_Primary_Reason_the_Annual_Report_Is_Important_in_Finance
Manuel, Dave. (31 July 2008) Knowing the Difference Between a 10-K, 10-Q and an 8-K. Retrieved from: http://www.davemanuel.com/2008/07/31/knowing-the-difference-between-a-10-k-10-q-and-an-8-k/
Jan, Infanullah. (17 December 2013) Statement of Cash Flows. Retrieved from: http://accountingexplained.com/financial/statements/cash-flow-statement
Jan, Obaidullah. (17 December 2013) Balance Sheet. Retrieved from: http://accountingexplained.com/financial/statements/balance-sheet
Jan, Obaidullah. (17 December 2013) Net Income Statement. Retrieved from: http://accountingexplained.com/financial/statements/income-statement
Jan, Irfanullah. (17 December 2013) Retained Earnings Statement. Retrieved from: http://accountingexplained.com/financial/statements/retained-earnings-statement

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