GAAP

GENARALLY ACCEPTED
ACCOUNTING PRINCIPLES
 Accounting principles
 “Accounting principles are guidelines to establish
standards for Sound accounting practices and
procedures in reporting the financial status and
periodic performance of a business”.
 It can be classified as
o Accounting concepts
o Accounting conventions



 Accounting Concepts
 “It may be considered as Postulates
i.e,basicassumption or conditions upon which the
science of accounting is based”
 Accounting conventions
 ‘It denotes Circumstances or traditions which guide
the accountants while preparing the accounting
statements”
 Accounting Principles
ACCOUNTING

 ACCOUNTING CONCEPTS
CONVENTIONS
 Business Entity  Consistency
 Money measurement
 Going concern
 Full Disclosure
 Dual aspect  Conservatism
 Cost  Materiality
 Accounting period
 Matching
 Law recognition
 Realization  Accuracy
Object Evidence
Accounting


 Accrual
equation

 Business Entity Concept

“Business unit is separate and distinct
from the person who supply capital to it”.
 Money Measurement
Concept
 Accounting transactions are recorded for those
which can be expressed in terms of money only.
 Going Concern Concept
 It is assumed that the business unit has a reasonable
expectation of continuity for an indefinite time.
 Dual Aspect Concept
 Every financial transaction has two Concept
 Yielding of benefit
 Giving of that benefit
 Cost Concept
 “All the assets are recorded at Cost price and not at
market price”.
 Accounting period concept
 “All accounting transactions are recorded for a
particular period usually one year”.
 Realisation Concept
 “Revenue is concidered as being earned on the date
of sale is made i.e on the date the property in goods
passes to the buyer and he legally becomes liable to
pay”.
 Objective Evidence Concept
 “Entries in accounting records must be based on
objectively determined evidence”.
 Accrual Concept
 Revenue is earned after sale is completed.
 Similarly expenses are recognised in the accounting
period.
 Convention of Consistency
 “Accounting rules and Practices should remain
consistent and they should not change from one year
after the other”.
 Convention of full disclosure
 “All accounting Statements should be honestly
made and should be disclosed to persons of material
interest”.
 Convention of conservatism
 “Anticipate no profits, but provide for all possible
losses”.
 Convention of materiality
 “It depends on the amount involved in the
transaction”
Accounting principles related to
P&l a/c
 Accounting period concept
 Accrual concept
 Realisation concept
 Materiality concept

 Accounting Principles relating
to
Balance Sheet
 Entity concept
 Money measurement concept
 Going concern concept
 Cost concept
 Dual aspect concept