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GENERALLYACCEPTED ACCOUNTING PRINCIPLES GAAP

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

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GENERALLYACCEPTED ACCOUNTING PRINCIPLES GAAP

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  1. GENERALLYACCEPTED ACCOUNTING PRINCIPLESGAAP

  2. 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

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

  4. 3. Going Concern Principle • Assumes that ordinarily an entity persists indefinitely. • Company’s existing resources will be used to fulfill business needs rather than be sold in tomorrow’s real estate or machinery market. • Opposite to Liquidation

  5. 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

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

  7. Conservatism • Expense Recognition • Revenue Recognition

  8. Stable Accounting Policies • Inventory Valuation Method LIFO FIFO WAC • Depreciation methods Straight Line Written Down Value etc

  9. Historical Value • Normally no revaluation of Assets

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