Explaining Basic Accounting Concepts And Business Structures

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

Other accounting literature, including GASB Concepts Statements; pronouncements in categories (a) through (d) of the hierarchy for nongovernmental entities when not specifically made applicable to state and local governments; FASB Concepts Statements; FASAB Statements, Interpretations, and Technical Bulletins, AICPA Issues Papers; International Accounting Standards Committee Statements, pronouncements of other professional associations or regulatory agencies; AICPA Technical Practice Aids; and accounting textbooks, handbooks, or articles.

The AICPA published the generally accepted auditing standards (GAAS). GAAS are those guidelines which auditors must follow while conducting an audit of a company's financial statements. It must also be stated in the audit report that the audit was conducted following GAAS.

Learning Objective: 04-03 Present an income statement with earnings per share, statement of stockholders equity, balance sheet, and statement of cash flows.

The documents that comprise GAAP vary in format, completeness, and structure. As a result, financial statement preparers sometimes are not sure whether they have the right GAAP; determining what is authoritative and what is not becomes difficult. In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification. The FASB’s primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. Professional accountants pay for access to the FASB. The OU Accounting Department has paid for academic access to the FASB Codification. Our Login information is:

GAAP stands for Generally Accepted Accounting Principles. This is a key component to know in any business. GAAP is based on established concepts, objectives, standards and conventions to guide how financial statements are prepared and presented. GAAP’s objective is to provide information that is useful to investors, lenders, or others that provide resources to a company or not-for-profit organization. GAAP includes principles on a few things. One is recognition. Recognition is defined as what items are to be listed on the financial statements. This includes assets, liabilities, revenues and expenses. The next is measurement. This refers to the amounts that need to be reports of each part of the financial statement. Another is presentation. This refers to what is displayed and listed on the statement and how they are organized. And lastly there is disclosure. This includes the specific information that is the most important to the people that utilize the financial

The FASB Codification database is easy to use when researching the accounting standards once the basics are fully understood. The FASB Codification database can be accessed by logging in at http://aaahq.org/ascLogin.cfm and using the following codes (case sensitive):

As the complexity of our financial economy develops it is important that our accounting standards progress in accordance. Accounting is very important to the development of the global and local economies. Accounting is basically the gathering, summarizing and presenting of financial information of an entity to interested internal, external and possible investors. This information should be presented in a non-bias way so that other people are able understand.

21. Rules adopted by the accounting profession as guides in measuring, recording, and reporting the financial condition and activities of a business:

“The number one strength of the text is the financial statement model approach and delaying introducing debits and credits for several chapters.”

The Morley (2012) website states that generally accepted accounting principles are standards that determine how accountants in the U.S. “Conduct and format their reports are determined by the FASB, U.S. Accounting records must be seen by a number of people outside of the organization for transparency purposes” (Morley, 2012). The Morley (2012) website states that if each company created its own accounting reporting methods, comparing financial statements would be inefficient and hiding information would be easier. According to the FASB, entities such as the U.S. Securities Exchange Commission and the American Institute of Certified Public Accountants recognize FASB's authority to set standards. This law ensures that no money is pocketed without being taxed and that all revenues are reported. As far as general financial ethical standards, “financial professionals have obligations to be competent, accountants and financial professionals must not only have secured education and practice that prepares them for their positions, but they must also continue that education by learning new information that can affect their practices” (Morley, 2012). According to “Associations For Financial Professionals” (2012), “financial professionals have an obligation to their

GAAP (Generally Accepted Accounting Principles) determine the content and format of financial statements. SEC (Securities and Exchange Commission) requires publicly traded companies to issue annual audit. Concerns are about adequacy of disclosure; and behavioral implications are secondary.

Feedback: A clear understanding of accounting terms and concepts is required of those who have a financial interest in an enterprise if they are to understand and communicate about the enterprise. Accounting

Each user of the financial statements interprets the information in a different manor. They use the information to determine their interactions with the organization. Management, investors, and employees use the same information from the financial statements but for different purposes. These four basic statements are the fundamentals of accounting which can be much more detail and complex. They do not need to be more complex for the users of the information; these basic statements have all the information needed to make

GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a