Explaining Basic Accounting Concepts and Business Structures
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Explaining Basic Accounting Concepts and Business Structures
COM 537 / Financial Accounting
2010
Explaining Basic Accounting Concepts and Business Structures
The first basic concept that a person would need to know when studying accounting is GAAP. GAAP, or generally accepted accounting principles, is a common set of standards that the accounting profession developed that is accepted and practiced by all users of financial accounting statements and reports (Kieso & Warfield, 2007, p. 5).
The major source organizations of GAAP are: American Institute of Certified Public Accountants (AICPA), Accounting Principles Board (APB), and the Financial Accounting Standards Board (FASB).
The AICPA is a National organization of practicing CPA’s. A committee of the AICPA is the APB or the Accounting Principles Board whose purposes are to advance the written expression of accounting principles, determine appropriate practices, and narrow the areas of difference and inconsistency in practice. The demise of the APB resulted in the creation of the Financial Accounting Standards Board (FASB). Its mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public. (Kieso & Warfield, 2007, pp. 7 & 8)
“The FASB standard of GAAP is called ‘The Hierarchy of Generally Accepted Accounting Principles,’ which defines the meaning of GAAP and identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial reports” (Kieso & Warfield, 2007, p. 12). The hierarchy is:
• Category A (most authoritative): FASB Standards, Interpretations, and Staff positions; APB Opinions; and AICPA Accounting Research Bulletins,
• Category B: FASB Technical Bulletins (no longer issued), AICPA Industry Audit and Accounting Guides, and AICPA Statements of Position,
• Category C: FASB Emerging Issues Task Force and AICPA AcSEC Practice Bulletins,
• Category...
COM 537 / Financial Accounting
2010
Explaining Basic Accounting Concepts and Business Structures
The first basic concept that a person would need to know when studying accounting is GAAP. GAAP, or generally accepted accounting principles, is a common set of standards that the accounting profession developed that is accepted and practiced by all users of financial accounting statements and reports (Kieso & Warfield, 2007, p. 5).
The major source organizations of GAAP are: American Institute of Certified Public Accountants (AICPA), Accounting Principles Board (APB), and the Financial Accounting Standards Board (FASB).
The AICPA is a National organization of practicing CPA’s. A committee of the AICPA is the APB or the Accounting Principles Board whose purposes are to advance the written expression of accounting principles, determine appropriate practices, and narrow the areas of difference and inconsistency in practice. The demise of the APB resulted in the creation of the Financial Accounting Standards Board (FASB). Its mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public. (Kieso & Warfield, 2007, pp. 7 & 8)
“The FASB standard of GAAP is called ‘The Hierarchy of Generally Accepted Accounting Principles,’ which defines the meaning of GAAP and identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial reports” (Kieso & Warfield, 2007, p. 12). The hierarchy is:
• Category A (most authoritative): FASB Standards, Interpretations, and Staff positions; APB Opinions; and AICPA Accounting Research Bulletins,
• Category B: FASB Technical Bulletins (no longer issued), AICPA Industry Audit and Accounting Guides, and AICPA Statements of Position,
• Category C: FASB Emerging Issues Task Force and AICPA AcSEC Practice Bulletins,
• Category...