WHAT ARE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES?
In The United States your Financial Statements and the Methods used in preparing them must abide by several rules, standards, assumptions, principles, guidelines, and modifying conventions. Other countries also have similar rules and standards. Collectively, these are referred to as Generally Accepted Accounting Principles (GAAP). In other words GAAP consists of the basic principles, assumptions and guidelines , the detailed rules and standards issued by the Financial Accounting Board (FASB), and the generally accepted industry practices. Generally Accepted Accounting Principles (GAAP) are the accounting rules used by companies (public and private) to prepare financial statements. Special rules apply to local and state governments and are determined by the Governmental Accounting Standards Board (GASB). Generally Accepted Accounting Principles are not laws per se, but the Securities and Exchange Commission (SEC) requires publicly traded companies to adhere to these rules. GAAP attempts
Nonaccountants sometimes ask the question, “Well, if these accounting principles are only generally accepted, that must mean that there are other perfectly good accounting principles that have less than general acceptance that are fine to use.” Unfortunately for those desiring creativity and uniqueness in their accounting principles, this is not the case. Generally accepted accounting principles (GAAP) are the rules of road that need to be followed by not-for-profit organizations if they want to proclaim that their financial statements are prepared in accordance with GAAP. WHY IS PREPARING GAAP FINANCIAL STATEMENTS IMPORTANT? Sometimes not-for-profit organizations are required by law or regulation to prepare financial statements in accordance with GAAP. Most states require that not-for-profit organizations that are organized within a state (or raise funds within that state) file an annual report with the state charities bureau (or its equivalent) and, for all but the smallest not-for-p
