What are the Generally Accepted Accounting Principles?
Generally accepted accounting principles, or GAAP as they are more commonly known, are rules for the preparation of financial statements. Every publicly traded company must release their financial statements each year. These statements are used by investors, banks and creditors to determine the financial health of the company and its suitability for investment or extension of credit. In order to properly compare and evaluate companies and their results, the financial statement must provide similar information in a similar format. Every country has its own generally accepted accounting principles, and all publicly released financial statements must comply with these rules. Although there is no comprehensive list of generally accepted accounting principles, the structure is based around four key assumptions, four basic principles and four basic constraints. Four Key Assumptions The key assumptions in generally accepted accounting principles are: business entity, going concern, monetary u
