What are the accounting principles?

Accounting principles are generally admitted standards and rules used in the preparation of financial magazines, books and statements. Their use enables owners of companies, investors and other parties to accept a clear and consistent understanding of the company's financial state based on reading its audited financial statements. Having generally accepted accounting principles is very similar to accepting the rules for language, such as the definitions of words and standards for grammar. Without generally accepted standards in language, meaning is lost; Without the generally accepted accounting principles, the declaration submitted to illustrate the financial situation of the company interpreted in different ways, which will lead to confusion and misunderstanding. Others are a matter of choice, and when a statement is prepared, this option must be recorded in a statement. For example, in determining the value of the inventory of the purchased goods, the company could use the current market value of inventories, or it could use the actual amount it paid for the inventory.Another choice that the Company must make is whether to use a cash or accrual basis for its accounting. The cash base, which is popular with individuals and small companies, involves recovering expenditure and income as they occur; Larger organizations almost generally use an acrual foundation and record these items as they occur.

different options available accounting and complexity of compliance with generally accepted accounting principles (GAAP), in fact it is important to codify them so that it can be easily consulted. In the United States, the Government of non -Non -Landat accounting standards and keep this task to the free market. GAAP is developed by professional bodies composed mainly of accountants. Only one organization, the Council for Financial Accounting Standards (FASB), in fact issues a statement about this principles for NGOs. Other organizations, the Board of Directors of Government Accounting Standards (GASB), deals with the purpose of governments. While the government will not take rules, the Securities and Exchange Commission (SEC) orders their use by all publicly held companies.

FASB issued more than 150 statements on the principles of financial accounting concerning such different topics as how to explain different types of income, how to report paid salaries and how to report the purchase of another company. FASB commands are exceptionally detailed because they try to deal with any possible combination of factors they may encounter. Despite this, some accountants can avoid the introduction of the honest and direct image of the financial status of the organization, twisting and manipulation of data that represent distorted and deceptive financial statements. Therefore, it is important that businesses are commonly audited by an impartial third party - certified public accountant (CPA) - the purpose of which is to confirm that their books and records are maintained in accordance with the GAAP.