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    What Is The Function of GAAP?: Features

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    narendra
    GAAP is the set of standard procedures for recording business transactions and financial reporting in the United States, created by the FASB. It provides uniformity in financial reporting to allow for comparisons between companies. The standards in GAAP aim to provide transparency into a company's finances through guidelines for revenue calculation, balance sheet classification, and other financial measurements. By encouraging consistent accounting practices, GAAP helps investors evaluate companies and make informed investment decisions.

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    What Is The Function of GAAP?: Features

    Uploaded by

    narendra
    344 views2 pages
    GAAP is the set of standard procedures for recording business transactions and financial reporting in the United States, created by the FASB. It provides uniformity in financial reporting to allow for comparisons between companies. The standards in GAAP aim to provide transparency into a company's finances through guidelines for revenue calculation, balance sheet classification, and other financial measurements. By encouraging consistent accounting practices, GAAP helps investors evaluate companies and make informed investment decisions.

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    GAAP

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    Function of GAAP

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    GAAP is the set of standard procedures for recording business transactions and financial reporting in the United States, created by the FASB. It provides uniformity in financial reporting to allow for comparisons between companies. The standards in GAAP aim to provide transparency into a company's finances through guidelines for revenue calculation, balance sheet classification, and other financial measurements. By encouraging consistent accounting practices, GAAP helps investors evaluate companies and make informed investment decisions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    344 views2 pages

    What Is The Function of GAAP?: Features

    Uploaded by

    narendra
    GAAP is the set of standard procedures for recording business transactions and financial reporting in the United States, created by the FASB. It provides uniformity in financial reporting to allow for comparisons between companies. The standards in GAAP aim to provide transparency into a company's finances through guidelines for revenue calculation, balance sheet classification, and other financial measurements. By encouraging consistent accounting practices, GAAP helps investors evaluate companies and make informed investment decisions.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    What is the Function of GAAP? about:reader?url=https://bizfluent.com/about-...

    bizfluent.com

    What is the Function of GAAP?

    3-4 minutes

    Though some of the rules of accounting may seem like


    common sense, it's a good idea to have them formalized and
    written down anyway. Others are very technical and not at all
    intuitive to the layman accountant. In the United States, the
    Generally Accepted Accounting Principles, or GAAP, are
    created by a privated company called the Financial Accounting
    Standards Board (FASB), which has been delegated this
    responsibility by the Securities and Exchange Commission.

    Features

    GAAP is the set of standard procedures for recording business


    transactions and reporting balance sheet entries. The features
    of GAAP include standards for how to calculate revenue, how
    to classify items on a balance sheet, and how to calculate
    outstanding share measurements.

    Significance

    The standards incorporated into GAAP provide general


    uniformity in figures that are in turn used to calculate
    important financial ratios that investors and analysts use to
    evaluate the company. Even compliant balance sheets can be
    challenging to decipher, but without a system defining each
    category of entry, corporate financial statements would be
    virtually opaque and worthless.

    Identification

    There are seven main principles that guide the establishment


    of the Generally Accepted Accounting Principles. The

    1 of 2 04/02/19, 8:27 pm
    What is the Function of GAAP? about:reader?url=https://bizfluent.com/about-...

    principles of regularity, consistency, permanence and sincerity


    go towards the encouraging companies to use the same lawful
    accounting practices quarter after quarter in a good faith effort
    to show the true financial condition of the company. Non-
    compensation, prudence and continuity establish guidelines
    for how to prepare a balance sheet, generally to report the
    financial status of the company as it is without treating assets
    in unorthodox ways that misrepresent the operations of the
    company just to offset other entries. The principle of
    periodicity simple means that income to be received overtime
    should be recorded as it is scheduled to be received, not in a
    lump sum up front.

    Function

    The unified system of accounting therefore has numerous


    benefits. Not only does it provide a certain level of
    transparency into a company's finances, it also makes for
    relatively easy comparisons between businesses. As a result,
    GAAP encourages investment by helping investors choose
    wisely. GAAP gives America companies an advantage over
    foreign ones where investors, unless they have an intimate
    understanding of the business, might have much more
    difficulty calculating the potential risks and rewards of an
    investment.

    Considerations

    GAAP applies to U.S.-based corporations only, though every


    other major country has accounting standards in place for their
    domestic businesses. In some cases, foreign accounting is
    fairly similar to U.S. GAAP, varying in only minor and easily
    accounted for ways. In other cases, the standards vary
    significantly making direct comparisons dubious at best.

    2 of 2 04/02/19, 8:27 pm

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