Generally Accepted Accounting Principles

more often than non veritable invoice Principles ( coupled States) In the U. S. , gener e rattling last(predicate)y accepted score rationales, unremarkably abbreviated as US gener altogethery accepted be principles or simply generally accepted ac find principles, argon account reconcilement rules ingestiond to prepargon, dedicate, and c everyplace m integritytary carryments for a wide mannikin of entities, including humansly-traded and privately-held companies, non- internet organizations, and governments. slackly GAAP includes local applicable method of accounting Framework, related accounting law, rules and method of accounting Standard.Similar to many separate countries practicing nether the common law system, the wholeed States government does non directly exercise snip accounting proto fictitious characters, in the mental picture that the private sector has better experience and resources. US GAAP is not written in law, although the U. S. Securities a nd Exchange rush (SEC) requires that it be followed in fiscal describe by publicly-traded companies. Cur countenancely, the m anetary account statement Standards calling card (FASB) is the highest authority in establishing more often than not accepted accounting principles for public and private companies, as sanitary as non-profit entities.For local and state governments, GAAP is determined by the governmental bill Standards Board (GASB), which operates down the stairs a set of premisss, principles, and constraints, different from those of standard private-sector GAAP. pecuniary pass overing in national government entities is regulated by the Federal chronicle Standards Advisory Board (FASAB). The US GAAP eatable differ somewhat from International Financial coverage Standards (IFRS), though fountain SEC Chairman Chris Cox set out a timetable for all U. S. ompanies to drop GAAP by 2016, with the largest companies turn to IFRS as early as 2009 Basic accusatorys Fin ancial describe should get out selective development that is designful to present to potential investors and creditors and former(a) users in reservation rational investment, credit, and other pecuniary finales. helpful to present to potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective immediate payment knows. about economic resources, the claims to those resources, and the changes in them. edit Basic conceptsTo achieve underlying objectives and implement fundamental qualities GAAP has quadruple fundamental assumptions, four basic principles, and four basic constraints. edit Assumptions accounting Entity assumes that the occupancy is separate from its owners or other businesses. Revenue and expense should be unploughed separate from personal expenses. passage Concern assumes that the business volition be in operation indefinitely. This validates the methods of plus capitalization, depreciation, and am ortization. Only when liquidation is certain this assumption is not applicable. M peerlesstary Unit principle assumes a stable capital is going to be the whole of study.The FASB accepts the nominal value of the US vaulting horse as the monetary unit of record unadjusted for inflation. The Time-period principle implies that the economic activities of an enterprise bed be divided into artificial time periods. edit Principles cost principle requires companies to account and motif establish on acquisition cost rather than fair commercialise value for most assets and liabilities. This principle come throughs information that is reliable (re lamentable opportunity to provide subjective and potentially biased merchandise values), hardly not very relevant.Thus there is a trend to use fair values. Most debts and securities be now reported at commercialise values. Revenue principle requires companies to record when task tax revenue is (1) realized or accomplishable and (2 ) earned, not when property is genuine. This modal value of accounting is called accrual basis accounting. interconnected principle. Expenses form to be matched with revenues as long as it is reasonable to do so. Expenses ar recognized not when the work is performed, or when a production is produced, but when the work or the product actually take aims its contribution to revenue.Only if no connection with revenue can be established, cost may be charged as expenses to the ongoing period (e. g. office salaries and other administrative expenses). This principle allows greater paygrade of actual profitability and process (shows how a great deal was spent to earn revenue). derogation and Cost of Goods Sold argon unafraid examples of application of this principle. Disclosure principle. tot and kinds of information disclosed should be unyielding based on trade-off analysis as a big amount of information cost more to prep are and use.Information disclosed should be enough t o make a judgment while keeping be reasonable. Information is presented in the chief(prenominal) body of fiscal statements, in the notes or as supplementary information edit Constraints Objectivity principle the order fiscal statements provided by the accountants should be based on objective evidence. Materiality principle the significance of an item should be considered when it is reported. An item is considered significant when it would affect the decision of a reasonable individual. accord principle It incriminates that the conjunction uses the aforesaid(prenominal) accounting principles and methods from year to year. oversight principle when choosing amid ii solutions, the one that will be least(prenominal) likely to overstate assets and income should be picked (see conclave of conservatism). largely Accepted write up Principles (UK) The Generally Accepted score praxis in the UK, or UK GAAP, are the overall body of regulation establishing how company accounts must be on the watch in the United Kingdom. This includes not only accounting standards, but likewise UK company law.What is referred to elsewhere as Generally Accepted Accounting Principles is in the UK referred to as Generally Accepted Accounting fare. edit History Accounting standards bring in from a public figure of sources. The chief standard-setter is the Accounting Standards Board (ASB), which issues standards called Financial account Standards (FRS). The ASB is piece of music of the Financial Reporting Council, an case-by-case regulator funded by a levy on listed companies1, and it replaced the Accounting Standards commissioning (ASC), which was disbanded in 1990 following a number of criticisms of its work.To the extent that the ASCs pronouncements, known as Statements of Standard Accounting Practice (SSAPs), have not been replaced by FRS, they await in force. edit Creation/change of Standards The ASB has a formal exposure dish up for proposed standards. Early c oncepts are issued as Discussion Papers. These are released to the public and comments invited. Where a overbold standard is to be proposed, a Financial Reporting motion-picture show Draft (FRED) is released for comment. The standard in final form is only issued when comments have been incorporated or loted.This aims to address the criticisms levelled at the ASC, whose comment process was less(prenominal) rigorous. Issues that require an immediate solution are considered by the Urgent Issues problem Force (UITF). The UITF comprises a number of senior figures from industry and accounting firms. It meets as necessary to consider military press issues and issues Abstracts which become binding immediately. edit Legislation The chief(prenominal) legislation governing reporting in the UK is laid down in the Companies answer 2006, which incorporates the requirements of European law.The Companies Act sets out certain minimum reporting requirements for companies and, for example, req uires limited companies to file their accounts with the recorder of Companies who makes them addressable to the general public. From 2005, this framework changed as a end point of European law requiring that all listed European companies report under International Financial Reporting Standards (IFRSs). In the UK, companies which are not listed have the option to report either under IFRSs or under UK GAAP2.Recently issued UK FRSs have, in any boldness replicated the wording of corresponding IFRSs, reducing the differences between the two sets of standards significantly. China Accounting Standards From Wikipedia, the free encyclopedia (Redirected from Chinese Accounting Standards) Jump to navigation, search Chinese accounting standards are the accounting rules use in Chinese state owned mickles in mainland China. They are presently being phased out in favour of Generally Accepted Accounting Principles or International Accounting Standards.As of February 2010, the Chinese Account ing Standard formations is unruffled of Basic Standard, 38 particular standards and Application Guidance. Chinese accounting standards are unique because they originated in a socialist period in which the state was the sole owner of industry. wherefore unlike Western accounting standards, they are less a asshole of profit and loss and an inventory of assets available to a company. In wrinkle to a Western end sheet, Chinese accounting standards do not include an accounting of the debts that a union holds, and are less worthy for management control than for accounting for tax revenueation purposes.This system of accounting is wide considered to be unsuitable for managing corporations in a market economy. As a answer, Chinese corporations are gradually moving toward International Financial Reporting Standards. This has proven to be a monolithic undertaking. As a topic Chinese companies who offer shares for sale in the United States used to be required to prepare three sets of statements, one using Chinese accounting standards (China GAAP), one using international standards (IFRS), and one using North American GAAP standards (US GAAP).However, since 2008 the U. S. Securities and Exchange Commission (SEC) allows contrasted private issuers to use fiscal statements prepared in accordance with IFRS. 1 However, in recent years, The Finance department of Chinese Government has issued new Chinese Accounting Standards which converge into IFRS and the proportion is almost 90-95%. The translation cost has been trim down greatly because of this measureGenerally Accepted Accounting PrinciplesGenerally Accepted Accounting Principles (United States) In the U. S. , generally accepted accounting principles, commonly abbreviated as US GAAP or simply GAAP, are accounting rules used to prepare, present, and report pecuniary statements for a wide variety of entities, including publicly-traded and privately-held companies, non-profit organizations, and governments. G enerally GAAP includes local applicable Accounting Framework, related accounting law, rules and Accounting Standard.Similar to many other countries practicing under the common law system, the United States government does not directly set accounting standards, in the belief that the private sector has better knowledge and resources. US GAAP is not written in law, although the U. S. Securities and Exchange Commission (SEC) requires that it be followed in pecuniary reporting by publicly-traded companies. Currently, the Financial Accounting Standards Board (FASB) is the highest authority in establishing generally accepted accounting principles for public and private companies, as well as non-profit entities.For local and state governments, GAAP is determined by the Governmental Accounting Standards Board (GASB), which operates under a set of assumptions, principles, and constraints, different from those of standard private-sector GAAP. Financial reporting in federal government entiti es is regulated by the Federal Accounting Standards Advisory Board (FASAB). The US GAAP provisions differ somewhat from International Financial Reporting Standards (IFRS), though former SEC Chairman Chris Cox set out a timetable for all U. S. ompanies to drop GAAP by 2016, with the largest companies switching to IFRS as early as 2009 Basic objectives Financial reporting should provide information that is useful to present to potential investors and creditors and other users in making rational investment, credit, and other monetary decisions. helpful to present to potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective silver receipts. about economic resources, the claims to those resources, and the changes in them. edit Basic conceptsTo achieve basic objectives and implement fundamental qualities GAAP has four basic assumptions, four basic principles, and four basic constraints. edit Assumptions Accounting Entity assumes t hat the business is separate from its owners or other businesses. Revenue and expense should be kept separate from personal expenses. Going Concern assumes that the business will be in operation indefinitely. This validates the methods of asset capitalization, depreciation, and amortization. Only when liquidation is certain this assumption is not applicable. Monetary Unit principle assumes a stable currency is going to be the unit of record.The FASB accepts the nominal value of the US Dollar as the monetary unit of record unadjusted for inflation. The Time-period principle implies that the economic activities of an enterprise can be divided into artificial time periods. edit Principles Cost principle requires companies to account and report based on acquisition costs rather than fair market value for most assets and liabilities. This principle provides information that is reliable (removing opportunity to provide subjective and potentially biased market values), but not very relevan t.Thus there is a trend to use fair values. Most debts and securities are now reported at market values. Revenue principle requires companies to record when revenue is (1) realized or realizable and (2) earned, not when coin is received. This way of accounting is called accrual basis accounting. Matching principle. Expenses have to be matched with revenues as long as it is reasonable to do so. Expenses are recognized not when the work is performed, or when a product is produced, but when the work or the product actually makes its contribution to revenue.Only if no connection with revenue can be established, cost may be charged as expenses to the current period (e. g. office salaries and other administrative expenses). This principle allows greater evaluation of actual profitability and performance (shows how much was spent to earn revenue). Depreciation and Cost of Goods Sold are good examples of application of this principle. Disclosure principle. Amount and kinds of information d isclosed should be decided based on trade-off analysis as a larger amount of information costs more to prepare and use.Information disclosed should be enough to make a judgment while keeping costs reasonable. Information is presented in the main body of financial statements, in the notes or as supplementary information edit Constraints Objectivity principle the company financial statements provided by the accountants should be based on objective evidence. Materiality principle the significance of an item should be considered when it is reported. An item is considered significant when it would affect the decision of a reasonable individual. Consistency principle It means that the company uses the same accounting principles and methods from year to year. Prudence principle when choosing between two solutions, the one that will be least likely to overstate assets and income should be picked (see convention of conservatism). Generally Accepted Accounting Principles (UK) The Generally Ac cepted Accounting Practice in the UK, or UK GAAP, are the overall body of regulation establishing how company accounts must be prepared in the United Kingdom. This includes not only accounting standards, but also UK company law.What is referred to elsewhere as Generally Accepted Accounting Principles is in the UK referred to as Generally Accepted Accounting Practice. edit History Accounting standards derive from a number of sources. The chief standard-setter is the Accounting Standards Board (ASB), which issues standards called Financial Reporting Standards (FRS). The ASB is part of the Financial Reporting Council, an independent regulator funded by a levy on listed companies1, and it replaced the Accounting Standards Committee (ASC), which was disbanded in 1990 following a number of criticisms of its work.To the extent that the ASCs pronouncements, known as Statements of Standard Accounting Practice (SSAPs), have not been replaced by FRS, they remain in force. edit Creation/Revisi on of Standards The ASB has a formal exposure process for proposed standards. Early concepts are issued as Discussion Papers. These are released to the public and comments invited. Where a new standard is to be proposed, a Financial Reporting Exposure Draft (FRED) is released for comment. The standard in final form is only issued when comments have been incorporated or addressed.This aims to address the criticisms levelled at the ASC, whose comment process was less rigorous. Issues that require an immediate solution are considered by the Urgent Issues Task Force (UITF). The UITF comprises a number of senior figures from industry and accounting firms. It meets as necessary to consider pressing issues and issues Abstracts which become binding immediately. edit Legislation The principal legislation governing reporting in the UK is laid down in the Companies Act 2006, which incorporates the requirements of European law.The Companies Act sets out certain minimum reporting requirements fo r companies and, for example, requires limited companies to file their accounts with the Registrar of Companies who makes them available to the general public. From 2005, this framework changed as a result of European law requiring that all listed European companies report under International Financial Reporting Standards (IFRSs). In the UK, companies which are not listed have the option to report either under IFRSs or under UK GAAP2.Recently issued UK FRSs have, in any case replicated the wording of corresponding IFRSs, reducing the differences between the two sets of standards significantly. China Accounting Standards From Wikipedia, the free encyclopedia (Redirected from Chinese Accounting Standards) Jump to navigation, search Chinese accounting standards are the accounting rules used in Chinese state owned corporations in mainland China. They are currently being phased out in favour of Generally Accepted Accounting Principles or International Accounting Standards.As of February 2010, the Chinese Accounting Standard Systems is composed of Basic Standard, 38 specific standards and Application Guidance. Chinese accounting standards are unique because they originated in a socialist period in which the state was the sole owner of industry. Therefore unlike Western accounting standards, they are less a tool of profit and loss and an inventory of assets available to a company. In contrast to a Western balance sheet, Chinese accounting standards do not include an accounting of the debts that a corporation holds, and are less suitable for management control than for accounting for tax purposes.This system of accounting is widely considered to be unsuitable for managing corporations in a market economy. As a result, Chinese corporations are gradually moving toward International Financial Reporting Standards. This has proven to be a massive undertaking. As a consequence Chinese companies who offer shares for sale in the United States used to be required to prepare th ree sets of statements, one using Chinese accounting standards (China GAAP), one using international standards (IFRS), and one using North American GAAP standards (US GAAP).However, since 2008 the U. S. Securities and Exchange Commission (SEC) allows foreign private issuers to use financial statements prepared in accordance with IFRS. 1 However, in recent years, The Finance Department of Chinese Government has issued new Chinese Accounting Standards which converge into IFRS and the similarity is almost 90-95%. The translation cost has been reduced greatly because of this measureGenerally Accepted Accounting PrinciplesA corporation must use the same depreciation method for tax and financial reporting purposes. Must use different depreciation methods for tax and financial reporting may use different depreciation methods for tax and financial reporting must use different (than for tax purposes), but purely mandated, depreciation methods for financial reporting purposes. 1 points appa rent movement 2 1 . Allocation of the historic costs of inflexible assets against the annual revenue they become is called net profits. Gross profits. Depreciation. Amortization. 1 points headspring 3 1 .Given the financial passenger cars preference for swift receipt of property blends, a monthlong depreciable flavour is preferred to a shorter one. A shorter depreciable brio sentence is preferred to a longstanding one. The manager is not concerned with depreciable lives, because depreciation is a non- silver expense. The manager is not concerned with depreciable lives, because once getd, depreciation is considered a sunk cost. 1 points head 4 1 . The Modified Accelerated Cost recuperation System (MACROS) is a depreciation method used for tax financial reporting managerial cost accounting fountainhead 5 .The depreciable life of an asset is of concern to the financial manager. In general, a nightlong depreciable life is preferred, because it will result in a faster re ceipt Of cash fluxs. A shorter depreciable life is preferred, because it will result in a faster receipt of cash flows. A shorter depreciable life is preferred, because management can past purchase new assets, as the old assets are written off. A longer depreciable life is preferred, because management can postpone purchasing new assets, since the one-time(a) assets still have a useful life. 1 points Question 6 1 . A corporation sold a fixed asset for $100,000.This is an investment cash flow and a source of funds. An run cash flow and a source of funds. An operating cash flow and a use of funds. An investment cash flow and a use of funds. Question 7 1 . A corporation raises $500,000 in long debt to sire additional plant capacity. This is considered an investment cash flow. A finance cash flow. A financing cash flow and investment cash flow, respectively. A financing cash flow and operating cash flow, respectively. 1 points Question 8 1 . A firms operating cash flow (SCOFF) is delimit as Ross profit minus operating expenses.Generally Accepted Accounting PrinciplesIntroduction The purpose of this report is to identify the items that may result in adjusting entries for both prepayments and accrual by looking at the mental testing balance and Income statement. Furthermore, analyzing the historical summary of financial Is to know the trend for profit or loss of the company assets.Fundamental First of all, why we have to make sad? Balance day adjustments are therefore required to check off the financial statements portray a correct picture on the firms financial performance and financial position. We have to recognize all transaction occurring in that accounting period, irrespective of whether cash has been received or pay. The ultimate objective of adjusting entries Is to date that the revenues (income) earned In the accounting period are matched by all costs Incurred for that name accounting period (Monish College, 2011).Prepayment There are two types of adjusting entries, prepayments and accruals. Prepayment is a payment in surface of the period to which it pertains. What this mean is, this home of adjustments aligns recorded revenues (income) and costs with appropriate accounting periods. For example, there are situations where cash Is received before goods and work are provided to customers or situations where cash has been paid In advance for costs of operation and which relate to futurity counting periods.Prepayments divided into two sections, which are prepaid expenses and u get alongned revenue. prepay expenses is type of assets that shown on a balance sheet as a result of business payments for goods and services to be received in the burn down future. sequence prepaid expenses are initially recorded as assets, their value Is expensed over time as the benefit Is receive something of value in the near future. Prepayments often occur In regard to Insurance, supplies, advertising, and rent. Earned revenue is also know n as prepaid revenue. It means payment, which is received in advance of providing a good or service. Since an obligation exists on the part of the company to provide goods or services for which the advance payment was received, honorary revenue is a liability. An example is a retainer received by an attorney. When the services are performed, revenue is the earned. Another examples are pre-booked airline ticket, rent received In advance and magazine subscriptionGenerally Accepted Accounting PrinciplesA corporation must use the same depreciation method for tax and financial reporting purposes. Must use different depreciation methods for tax and financial reporting may use different depreciation methods for tax and financial reporting must use different (than for tax purposes), but strictly mandated, depreciation methods for financial reporting purposes. 1 points Question 2 1 . Allocation of the historic costs of fixed assets against the annual revenue they generate is called net prof its. Gross profits. Depreciation. Amortization. 1 points Question 3 1 .Given the financial managers preference for faster receipt of cash flows, a longer depreciable life is preferred to a shorter one. A shorter depreciable life is preferred to a longer one. The manager is not concerned with depreciable lives, because depreciation is a non-cash expense. The manager is not concerned with depreciable lives, because once purchased, depreciation is considered a sunk cost. 1 points Question 4 1 . The Modified Accelerated Cost Recovery System (MACROS) is a depreciation method used for tax financial reporting managerial cost accounting Question 5 .The depreciable life of an asset is of concern to the financial manager. In general, a longer depreciable life is preferred, because it will result in a faster receipt Of cash flows. A shorter depreciable life is preferred, because it will result in a faster receipt of cash flows. A shorter depreciable life is preferred, because management can th en purchase new assets, as the old assets are written off. A longer depreciable life is preferred, because management can postpone purchasing new assets, since the Old assets still have a useful life. 1 points Question 6 1 . A corporation sold a fixed asset for $100,000.This is an investment cash flow and a source of funds. An operating cash flow and a source of funds. An operating cash flow and a use of funds. An investment cash flow and a use of funds. Question 7 1 . A corporation raises $500,000 in long-term debt to acquire additional plant capacity. This is considered an investment cash flow. A financing cash flow. A financing cash flow and investment cash flow, respectively. A financing cash flow and operating cash flow, respectively. 1 points Question 8 1 . A firms operating cash flow (SCOFF) is defined as Ross profit minus operating expenses.Generally Accepted Accounting PrinciplesIntroduction The purpose of this report is to identify the items that may result in adjusting en tries for both prepayments and accrual by looking at the trial balance and Income statement. Furthermore, analyzing the historical summary of financial Is to know the trend for profit or loss of the company assets.Fundamental First of all, why we have to make BAD? Balance day adjustments are therefore required to ensure the financial statements portray a correct picture on the firms financial performance and financial position. We have to recognize all transaction occurring in that accounting period, irrespective of whether cash has been received or paid. The ultimate objective of adjusting entries Is to ensure that the revenues (income) earned In the accounting period are matched by all costs Incurred for that name accounting period (Monish College, 2011).Prepayment There are two types of adjusting entries, prepayments and accruals. Prepayment is a payment in advance of the period to which it pertains. What this mean is, this category of adjustments aligns recorded revenues (income ) and costs with appropriate accounting periods. For example, there are situations where cash Is received before goods and services are provided to customers or situations where cash has been paid In advance for costs of operation and which relate to future counting periods.Prepayments divided into two sections, which are prepaid expenses and unearned revenue. Prepaid expenses is type of assets that shown on a balance sheet as a result of business payments for goods and services to be received in the near future. While prepaid expenses are initially recorded as assets, their value Is expensed over time as the benefit Is receive something of value in the near future. Prepayments often occur In regard to Insurance, supplies, advertising, and rent. Earned revenue is also known as prepaid revenue. It means payment, which is received in advance of providing a good or service. Since an obligation exists on the part of the company to provide goods or services for which the advance payment was received, unearned revenue is a liability. An example is a retainer received by an attorney. When the services are performed, revenue is the earned. Another examples are pre-booked airline ticket, rent received In advance and magazine subscription