GENERALLYACCEPTED ACCOUNTING PRINCIPLES GAAP

1. ENTITY CONCEPT
An accounting entity is an organisation that stands apart from other organisations or individuals as a separate economic unit
Company vs shareholder

2. RELIABILITY
Reliable information Data supported by convincing evidence Verifiable by independent accountants

3. Going Concern Principle

Assumes that ordinarily an entity persists indefinitely. Companys existing resources will be used to fulfill business needs rather than be sold in tomorrows real estate or machinery market. Opposite to Liquidation

4. Materiality Concept
What to include in financial statements An item should be included in the financial statements if its omission misleads the the reader of the financial statement. Fixed assets (office stationery) vs Expenses

Stable Monetary Unit

All costs, assets etc are onverted to monetary units Monetary unit should not be changed over time.

Conservatism
Expense Recognition Revenue Recognition

Stable Accounting Policies

Inventory Valuation Method LIFO FIFO WAC
Depreciation methods Straight Line Written Down Value etc

Historical Value
Normally no revaluation of Assets