Coming Soon
Subscription Marketplace - Buy and sell subscription products and services
0 like 0 dislike
611 views
in Articles by
If everyone involved in the process of accounting followed their own system, or no system at all, there's be no way to truly tell whether a company was profitable or not. Most companies follow what are called generally accepted accounting principles, or GAAP, and there are huge tomes in libraries and bookstores devoted to just this one topic. Unless a company states otherwise, anyone reading a financial statement can make the assumption that company has used GAAP.

If GAAP are not the principles used for preparing financial statements, then a business needs to make clear which other form of accounting they're used and are bound to avoid using titles in its financial statements that could mislead the person examining it.  

GAAP are the gold standard for preparing financial statement. Not disclosing that it has used principles other than GAAP makes a company legally liable for any misleading or misunderstood data. These principles have been fine-tuned over decades and have effectively governed accounting methods and the financial reporting systems of businesses. Different principles have been established for different types of business entities, such for-profit and not-for-profit companies, governments and other enterprises.

GAAP are not cut and dried, however. They're guidelines and as such are often open to interpretation. Estimates have to be made at times, and they require good faith efforts towards accuracy. You've surely heard the phrase "creative accounting" and this is when a company pushes the envelope a little (or a lot) to make their business look more profitable than it might actually be. This is also called massaging the numbers. This can get out of control and quickly turn into accounting fraud, which is also called cooking the books. The results of these practices can be devastating and ruin hundreds and thousands of lives, as in the cases of Enron, Rite Aid and others.

Please log in or register to reply to this topic.

Related topics

0 like 0 dislike
0 replies 636 views
posted in Articles by HairyMagpie
0 like 0 dislike
0 replies 1,538 views
posted in Articles by Octopixy
0 like 0 dislike
0 replies 623 views
posted in Articles by FrighteningTwinkles
0 like 0 dislike
0 replies 570 views
posted in Articles by Sassassin
0 like 0 dislike
0 replies 501 views
posted in Articles by Octopuppy
0 like 0 dislike
0 replies 503 views
posted in Articles by Finderpros
0 like 0 dislike
0 replies 600 views
posted in Articles by LovableStorm
0 like 0 dislike
0 replies 582 views
posted in Articles by GiftedWrecker
0 like 0 dislike
0 replies 518 views
posted in Articles by AmazingKitty
0 like 0 dislike
0 replies 575 views
posted in Articles by Amigod
0 like 0 dislike
0 replies 569 views
posted in Articles by Cybora
0 like 0 dislike
0 replies 472 views
posted in Articles by Prepatriarch
0 like 0 dislike
0 replies 500 views
posted in Articles by Knightmare
0 like 0 dislike
0 replies 489 views
posted in Articles by VirtualAssassin
0 like 0 dislike
0 replies 482 views
posted in Articles by TwinNut
0 like 0 dislike
0 replies 523 views
posted in Articles by Hawkward
0 like 0 dislike
0 replies 465 views
posted in Articles by FlamboyantChomper
0 like 0 dislike
0 replies 503 views
posted in Articles by PlushSeal
0 like 0 dislike
0 replies 544 views
posted in Articles by PerfumedNecromancer
0 like 0 dislike
0 replies 451 views
posted in Articles by CheeryGrin
0 like 0 dislike
0 replies 713 views
posted in Articles by Richard S.
0 like 0 dislike
0 replies 508 views
posted in Articles by GardenParrot
0 like 0 dislike
0 replies 604 views
posted in Articles by CharmingChamp
0 like 0 dislike
0 replies 506 views
posted in Articles by Slayerk
0 like 0 dislike
0 replies 565 views
posted in Articles by DreamBaby
0 like 0 dislike
0 replies 501 views
posted in Articles by HistoryGuy
0 like 0 dislike
0 replies 486 views
posted in Articles by SilentTrooper
0 like 0 dislike
0 replies 602 views
posted in Articles by GrizzlyFlash
0 like 0 dislike
0 replies 593 views
posted in Articles by VoyageHooper
0 like 0 dislike
0 replies 635 views
posted in Articles by BeautifulWolf
0 like 0 dislike
0 replies 612 views
posted in Articles by Wallaby
0 like 0 dislike
0 replies 598 views
posted in Articles by Falconjurer
0 like 0 dislike
0 replies 573 views
posted in Articles by Emufasa
0 like 0 dislike
0 replies 604 views
posted in Articles by Celestiger
0 like 0 dislike
0 replies 619 views
posted in Articles by PositiveVoid
0 like 0 dislike
0 replies 569 views
posted in Articles by OpinionOwl
0 like 0 dislike
0 replies 582 views
posted in Articles by TrustyKitty
0 like 0 dislike
0 replies 613 views
posted in Articles by SleepyFledgling
0 like 0 dislike
0 replies 591 views
posted in Articles by GroundHurricane
0 like 0 dislike
0 replies 586 views
posted in Articles by SwiftHeroine
0 like 0 dislike
0 replies 582 views
posted in Articles by Sumogre
0 like 0 dislike
0 replies 604 views
posted in Articles by Mosquiche
0 like 0 dislike
0 replies 557 views
posted in Articles by Tabooccaneer
0 like 0 dislike
0 replies 549 views
posted in Articles by GamerAlpaca
Connect with us:
...