Generally Accepted Accounting Principles: GAAP

GAAPs: guidelines developed by a professional accountants for the way accounting records and financial statements are prepared.

Key Concepts of GAAPs

Business Entity

Finances of s business are kept separate from those of the owner.

Time Period

Accountants use time periods of equal and appropriate length to measure the financial health of a business.

Cost Principle

Must record the actual cost of a business purchase as the cost in the books.

Consistency Principle

Accountants apply the same rules, methods, and procedures from one financial period to the next.