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GAAP
GAAP refers to Generally Accepted Accounting Principles which are the Rules to which accountants adhere when preparing financial statements .
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Asked 1/28/2010 8:08:23 AM
Updated 4/5/2014 6:33:43 AM
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GAAP refers to Generally Accepted Accounting Principles

which are the Rules to which accountants adhere when preparing financial statements .


Added 4/5/2014 6:33:43 AM
This answer has been confirmed as correct and helpful.
Confirmed by jeifunk [4/5/2014 6:41:51 AM]
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GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements.
Principle of regularity: Regularity can be defined as conformity to enforced rules and laws.
Principle of consistency: This principle states that when a business has once fixed a method for the accounting treatment of an item, it will enter all similar items that follow in exactly the same way.
Principle of sincerity: According to this principle, the accounting unit should reflect in good faith the reality of the company's financial status.
Principle of the permanence of methods: This principle aims at allowing the coherence and comparison of the financial information published by the company.
Principle of non-compensation: One should show the full details of the financial information and not seek to compensate a debt with an asset, a revenue with an expense, etc. (see convention of conservatism)
Principle of prudence: This principle aims at showing the reality "as is" : one should not try to make things look prettier than they are. Typically, a revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable.
Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle mitigates the principle of prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value (see depreciation and going concern).
Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription (or lease, etc.), the given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction.
Principle of Full Disclosure/Materiality: All information and values pertaining to the financial position of a business must be disclosed in the records.
Principle of Utmost Good Faith: All the information regarding to the firm should be disclose to the insurer before the insurance policy is taken.
Added 1/28/2010 8:38:13 AM
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