Hello and welcome to another video from Jon’s Bookkeeping.
I’m Jon Cooney and today I want to talk about Generally Accepted Accounting Principles (or GAAP)
In this video, I'll break down what GAAP is, its key principles, and why it matters. Let's get started!
So, what is GAAP? GAAP is a set of guidelines that accountants and bookkeepers use to prepare financial statements.
It's like a recipe book for accounting, ensuring consistency and transparency in financial reporting.
GAAP is used by companies, non-profits, and governments to ensure their financial statements are presented in a fair and consistent manner.
GAAP is based on four key principles:
Accounting Entity: This principle requires businesses to keep their financial transactions separate from personal transactions.
In other words, your business finances should be separate from your personal finances.Going Concern: This principle assumes that a business will continue operating for the foreseeable future.
This means accountants should record assets and liabilities based on their long-term value, rather than their short-term value.Monetary Unit: This principle requires all financial transactions to be recorded in a common currency, such as US dollars.
Historical Cost: This principle requires assets and liabilities to be recorded at their original cost, rather than their current market value.
So why does GAAP matter?
GAAP matters because it helps investors and creditors make informed decisions.
By ensuring financial statements are accurate, reliable, and consistent, GAAP helps stakeholders understand a company's financial health and make informed decisions.
That's GAAP in a nutshell! By following these principles, accountants and bookkeepers can ensure financial statements are trustworthy and transparent.
And if you need help with your financial statements, schedule a free consultation call with me.
We can talk about your business and bookkeeping needs.
I’ll bet I can help you and can’t wait to speak with you.
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