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Essay / Research Paper Abstract
A 3 page paper. GAAP is explained. The essay explains assets, liabilities and owner's equity, and the four financial statements of a company are described. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: MM12_PGgaap8.rtf
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Unformatted sample text from the term paper:
2007). The principles are primarily determined by the Financial Accounting Standards Board (FASB) although other organizations do contribute to the development of the practices (Bradford, 2007). The Security and Exchange
Commission (SEC) has given the primary responsibility and authority to design these standards to the FASB (Bradford, 2007). The GAAP presents rather general methods that can be adapted to
different industries or types of public organizations (Bradford, 2007). The major principles are "consistency, relevance, reliability, and comparability" (Bradford, 2007). Consistency is about having all information reported in the same
way across different periods of time, e.g., the method used to calculate inventory must stay the same from one period, such as a quarter, to another (Bradford, 2007). Relevance has
to do with the information included on financial statements are appropriate for the company (Bradford, 2007). Reliability means that the information reported must be valid and verifiable (Bradford, 2007). Comparability
has to do with the financial statements of one company be able to be compared to those of another company in the same industry (Bradford, 2007). The ability to compare
financial statements of different companies in the same industry is essential for an investor, if statements are not comparable, the investor has no way of evaluating different companies. GAAP
principles are intended to bring some amount of standardization to accounting and auditing practices. All public organizations are expected to adhere to the GAAP methods and practices of accounting and
reporting. 2. What are Assets, Liabilities, Owners Equity Assets may be fixed or current. Current assets are those things that can be converted to cash quickly (Quick MBA,
2007). Examples of current assets are cash accounts, such as a checking or savings account, accounts receivable, inventory, securities, and other things like a prepaid insurance policy (Quick MBA, 2007).
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