GAAP

• Business Entity A business

  is considered a separate entity from the owner(s) and should be treated separately.
• Going Concern

  It assumes that an entity will continue to operate indefinitely
• Monetary Unit

  The business financial transactions recorded and reported should be in monetary unit
• Historical Cost

  All business resources acquired should be valued and recorded based on the actual cash equivalent or original cost of acquisition, not the prevailing market value or future value.
• Matching

  This principle requires that revenue recorded, in a given accounting period, should have an equivalent expense recorded, in order to show the true profit of the business.
• Accounting Period

  This principle entails a business to complete the whole accounting process over a specific operating time period.
• Conservatism

  This principle states that given two options in the amount of business transactions, the amount recorded should be the lower rather than the higher value.
• Consistency

  This principle ensures similar and consistent accounting

  procedures is used by the business, year after year, unless change is

  necessary
• Materiality

  Business transactions that will affect the decision of a user are considered important or material, thus, must be reported properly.
• Objectivity

  This principle states that the recorded amount should have some form of impartial supporting evidence or documentation.
• Accrual

  This principle requires that revenue should be recorded in the period it is earned, regardless of the time the cash is received.
• General Journal is also called as Book of Original Entry
• General Ledger is also called as Book of Final Entry
• Going concerns means continuity
• Matching means recorded revenues must have an accompanied costs/expenses in the book.
• Reversing entries are NOT necessary
• There are 3 trial balances in the accounting parlance
•  Going concern is similar to principle of Continuity
• Conservatism

  This recognizes all potential liabilities and expenses and only record assets and revenues when there's a certainty of these occurring. Sales recorded are of lesser value while costs recorded are of higher value.
• Consistency

  Apply the chosen methods for the rest of the period. Change it once reporting is done and ready for next business year
• Matching

  Accountants record all expenses with related revenue.
• GAAP

  Are set of official, common standards of practice among accounting professionals. 
• Accrual

  This principle encourages accountants to record a transaction during the period in which it takes place, rather than when it affects the cash flow of the organization. 
• Consistency

  Change in accounting method is prohibited especially when the accounting period is not yet over.
• especially when?


  accounting period is not yet over