CHP 2: FUNDAMENTAL ACCOUNTING CONCEPTS

2.1 Generally Accepted Accounting Principle (GAAP)

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). These standards indicate how to report economic events.

The primary accounting standard-setting body in the United States is the Financial Accounting Standards 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 of the United States have adopted the accounting standards issued by the international Accounting Standards Board (IASB). These standards are called International Financial Reporting Standards (IFRS).

As markets become more global, it is often desirable to compare the

results of companies from different countries that report using different accounting standards. In order to increase comparability, in recent years the two standard-setting bodies have made efforts to reduce the differences between U.S. GAAP and IFRS. This process is referred to as convergence.

As a result of these convergence efforts, it is likely that someday there will be a single set of high-quality accounting standards that are used by companies around the world.

Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.

GAAP vs IFRS – All You Need To Know

MASB (MALAYSIAN ACCOUNTING STANDARD BOARD)

ACCOUNTINGFOUNDATION

The Importance of GAAP

2.2 Assumptions in Financial Reporting

There are four basic assumptions of financial accounting: (1) economic entity, (2) fiscal period, (3) going concern, and (4) stable currency. These assumptions are important because they form the building blocks on which financial accounting measurement is based.

4 Accounting Assumptions

2.3 Principles in Financial Reporting

Accounting principles are the rules and guidelines that companies must follow when reporting financial data. The Financial Accounting Standards Board (FASB) issues a standardized set of accounting principles in the U.S. referred to as generally accepted accounting principles (GAAP)

12 Basic Accounting Principles

All 10 GAAP Principles – Meaning, Importance And More

Accounting Principles

2.4 Qualities of Useful Information

Top 11 Qualities Characteristic of Accounting Information

For additional information, please watch these following videos... Enjoy watching !!
The Conceptual Framework for Financial Reporting (You Tube):

1. What is the Framework?

2. The Objective of General Purpose Financial Reporting

3. The Qualitative Characteristics of Useful Information

4. Underlying Assumptions of General Purpose Financial Statements (Going Concern and Accrual Basis)

5. Definition of Elements of Financial Statements

6. Recognition Criteria for the Elements of Financial Statements

7. Measurement of the Elements of Financial Statements

8. Conceptual Framework - Capital Maintenance

PLEASE EXPLORE MORE: TALBADI EDUCATION (YOU TUBE)

Recommended text/reading:

• Sangster, A., & Wood, F. (2019). Business accounting volume 2 (14th ed.). Pearson.
•  Sangster, A., & Wood, F. (2018). Business accounting volume 1 (14th ed.). Pearson.
•  Weagant, J.J., Kimmel, P.D., & Keiso, D.E. (2018). Accounting principles (12th ed.).  Wiley. (for this ebook you need to join this channel >> accounting <<

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Sanisah Hanim Jiman