Generally Accepted Accounting Principles

    Generally Accepted Accounting Principles

The accounting profession has developed standards that are generally accepted and universally practiced. This common set of standards is called Generally Accepted Accounting Principles (GAAP). this standards indicate how to report economic events.

    The primary accounting standard setting body in the united states is Financial Accounting Standard Board (FASB). The Securities and Exchange Commission (SEC) is the agency of the U.S.government that oversees U.S. financial markets and accounting standard - setting bodies. The sec relies on the FASB to develop accounting standards. which public companies must follow. many countries outside united states have adopted the accounting standards issued by the International Accounting Standard Board (IASB). in recent years the FASB and IASB have worked closely to try to minimize the differences in their standards and principles.

    One important the accounting principles is cost principles. the cost principles dictates the the company record the assets at their cost. this is true not only at the time of purchasing asset but also over the time the asset is held. for example if best buy purchases land for 30000$, the company initially report it in the accounting records at 30000$. but what does best buy do if , by the end of the next year, the land has increased in the value to 40000$?!! under the cost principle it continues to report the land at 30000$.