Generally Accepted Accounting Principles (GAAPs)

“A collection of rules and procedures and conventions that define accepted accounting practice; includes broad guidelines as well as detailed procedures.”

1. Money Measurement:
Only those Transactions are recorded which are measured in monetary terms.

2. Going Concern:
It’s an estimation and assumption that the business will proceed till the foreseeable future.

3. Accounting Period:
The time period which is assumed for reporting is called Accounting Period. Usually it’s a 12 month period but it can be any period set by the business.

4. Duality:
The principles of duality describes that every transaction has two aspects of treatment in books of accounts.

5. Evidence:
The written source of document of a transaction is called evidence.

6. Accruals:
It means every aspect of a transaction should be recorded according to GAAP.

7. Matching:
It means the Revenues of current year should be adjusted against the Expense of the same year.

8. Materiality:
The omissions and miss-statements which can influence the decision of the investors are material for the business.

9. Consistency:
Disclosing and presenting criteria must be consistent while presenting Reports.

10. Prudence:
Expected Losses are recorded but expected profits are not.
Assets will not be over stated and Liabilities will not be under stated.

11. Substance over Form:
The control will supersede the ownership.