GAAP

Authoritative rules, practices, and conventions meant to provide both

broad guidelines and detailed procedures for preparing financial
statements and handling specific accounting situations.

Entity concept
In accounting, the separate entity concept treats a business as distinct and separate from its owners. It is
necessary to record the business's transactions separately, to distinguish them from the owner's personal
transactions

Going concern
Currently operating business that is expected to continue to function as such and remain viable in the
foreseeable future.

Accounting period
Accounting concept that the operating cycle of a firm can be divided into distinct accounting
periods (a month or a quarter, for example) of relatively short lengths for which
accounting information can be collected, matched, and reported in a timely manner.

Stable dollar
Financial statements must b prepared is currency that is stable and has not much fluctuations e-g
dollar

objectivity principle
An accounting principle that states that a company's financial information be based on verifiable data.

COST PRINCIPLE
Accounting concept that goods and services purchased should be recorded at their historical cost and
not at their current market value.

realization principle
An accounting standard that recognizes revenue only when it is earned. Generally,
realization occurs when goods are sold or a service is rendered.
Matching Principle
It states that, in measuring net income for an accounting period, the costs incurred in
that period should be matched against the revenue generated in the same period.

Consistency
Basic accounting concept that once an accounting method is adopted, it should be followed
consistently from one accounting period to the next. If, for any reason, the accounting method is
changed, a full disclosure of the change and an explanation of its effects on the items of the financial
statements must be given in the accompanying notes (footnotes).

Disclosure principle
Disclosure principle states that any and all information that affects the full understanding of a
company's financial statements must be include with the financial statements. Some items may not
affect the ledger accounts directly. These would be included in the form of accompanying notes.

Materiality
the term materiality refers to the relative importance of an item or event. The item is material if it can
influence tha user's decision

Conservatism
Accounting concept that requires recording (recognizing) the expenses and liabilities as soon as
possible, but the revenues only when they are realized or assured.