Explaining Basic Accounting Concepts and Business Structures
The Sources of Generally Accepted Accounting Principles
The Generally Accepted Accounting Principles (GAAP) was created by four organizations which were instrumental to the development of the financial accounting standards; the Securities Exchange Commission (SEC), American Institute of Certified Accountants (AICPA), Financial Accounting Standards Board (FASB), and the Government Accounting Standards Board (GASB). The GAAP has significant authoritative support from five major sources: The FASB Standard,Interpretations,Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins (Kieso, Weygandt, Warfield, 2007).
The FASB issues, establishes and improves financial accounting standards, guidance and education reporting and is the authority in the United States for the establishment of accounting principles. The Interpretations extend or modify the existing standards. Staff Positions and Standards and Interpretations both have the same authority. APB Opinions until 1973 were the accounting industry standards that established uniform practices. Between 1938-1959,the AICPA Accounting Research Bulletins handled a number of accounting issues using 51 documents.
The Hierarchy of Generally Accepted Accounting Principles (GAAP) is used to identify the sources and structures of accounting principles for selecting financial statements to be utilized when preparations were created by the FASB. The Hierarchy governs the major the sources.
Effective Accounting Information and Qualities of Accounting
It is the Qualitative characteristic that accounting information contains that investor, creditors and lenders find useful when…