Meaning of GAAP Homework Answers
GAAP is a short form for Generally Accepted Accounting Principles which are a general set of basic principles of accounting, that are conventionally accepted by accountants and accounting bodies throughout the whole world and especially applies to the US. They are not only principles but some common standards, practices, and procedures which are followed by all companies and corporate throughout the globe.
It is a compilation of a group of well-founded accounting policies formulated under the auspices of global accounting bodies. GAAP is a very crucial topic that students and professionals come across. Students are most often in search of the meaning of GAAP homework answers due to this reason.
GAAP â€“ An overview
Generally accepted accounting principles suggest and direct ways and means of correctly recording accounting information, correctly classifying such information and also organizing and re-organizing it.
It provides solid guidelines to correctly report and present the data. The most vital feature of GAAP is that it does not vary from country to country. Every region and country of the world engaged in the field of accountancy follow these same set of principles and standards to record, post and present transactions.
As a result, there is a certain level of transparency in the whole data reported by the enterprise. It fosters clarity in financial reporting. In the early 1900â€™s the people of America had lost faith in the financial reporting of companies which led to the formulation of these rules which govern the firm till date.
When to comply with generally accepted accounting principles?
Some companies and other special entities are statutorily obliged to abide by these generally accepted accounting principles. For some entities, it is completely optional. However, compliance with generally accepted accounting principles by an enterprise even when it is not mandatory for it to follow, improves investorâ€™s faith in the financial statements and external reports. It indicates quality and comparability in the data.
When a business entity comes across a situation that evokes dilemma and confusion as to the principle to be followed, it is always recommended that it complies with the principles of GAAP.
Of course, accounting is both an art and science, so there are no hard and fast rules as to which principles are to be abided by. It ultimately depends on the individual facts and circumstances. The accountant has to apply his own skill and diligence to make sure a reasonable principle is pursued.
Drawbacks of not following GAAPs
The companies that publicly traded securities in the open market are compulsorily required to adhere to the guidelines of GAAP. They must stick to the principle that the company is a separate legal entity and not the same as its owners or shareholders. There is a corporate veil that persists between them.
If the conventionally accepted principles of accounting are not followed when a company presents its business related data, the investing body should be absolutely cautious and beware of misrepresentation.
It brings down the faith of investors and stakeholders who hold some interest in the firm. If the companies fail to disclose the fact that there are some severe or mild deviations from the generally accepted accounting principles, it is also a great matter of concern for the users of accounting information.
So we can observe that this subject matter is also very vital for common investors. Some people are not even acquainted with the GAAPs as a matter of fact.
So if you want to know the meaning of GAAP homework answers, I would definitely recommend taking the sincere assistance offered by online experts in this regard. A simple consultation can save common investors from potential future losses.
Generally Accepted Accounting Principles and International Financial Reporting Standards- Difference:
Apart from the basic fact that these two are formulated by different accounting bodies, another basic point of distinction is that GAAPs specifically applies to US companies while the scope of IFRS is a bit larger. There are various grounds on which they both tally but a few differences obviously pertain.
Both the issuing bodies are keen on eliminating deviations between the principles of IFRS and GAAPs. The work is still in progress. In fact, in some instances, US companies compiling with IFRS are not mandatorily required to observe GAAP principles as was the case a few years ago. It is the expertsâ€™ goal to formulate a unified set of principles so that there is comparability in accounts of all countries.
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Few Other Facts
While experts can help you achieve a clear concept about the meaning of GAAP homework answers, there is no surety that by applying these concepts one can vouch that the financial statements such as profit and loss and balance sheet are free from material errors or fraud. As the name suggests, these principles are general. To put it in other words that are expected to be reasonable and genuine.
If the accounting reports are absolutely genuine or not is for the statutory auditors to decide who rely on certain evidence and audit procedures to come to such a conclusion. The auditors do make sure that the accounting is made by following these standards.
But that alone is not an exhaustive proof of reasonable accuracy of data. Special scrutinizes, and investigations are called for if there is any room for substantial doubt.
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GAAP being a very powerful and predominant aspect of accountancy needs detailed explanations. The experts are always ready to address specific doubts of students with utmost care and sincerity. They are acquainted with the real life scenarios and equipped with practical experiences in the corporate world.