Accounting Principles

If everyone involved in the process of accounting followed their own system or the system at all, there is no way to really know whether a company was profitable or not. Most companies follow the so-called Generally Accepted Accounting Principles, or GAAP, and huge quantities in libraries and bookstores devoted to this topic only. If a company can otherwise assume any of them reading a statement that the company uses GAAP.

If not, the GAAP principles to the financial statements are prepared, a company must make it clear that a different method of accounting used and are obliged to avoid using titles in the financial statements that are misleading and question the person.

GAAP are the gold standard for the preparation of financial statements. Not clear who uses GAAP, a company legally responsible for misinformation or misunderstood. These principles have been refined over decades and have actually tried the methods of accounting and information systems business. have different principles for different types of business entities, as established for-profit companies and nonprofit organizations, governments and other companies.

GAAP are not cut and dried, however. Guidelines and as such for design purposes. The estimates were made of moments, which requires good faith effort to accuracy. You may have heard of "creative accounting" of the sentence, and that's where a company the limits a little (or a lot), pushes their business look more profitable than it might actually be. This massage is also called the number. This can quickly spiral out of control and the accounting fraud, and the books. The results of these practices can be devastating and ruin hundreds of thousands of lives, as in the case of Enron, Rite Aid and others.