Fundamentals of Accounting
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Part I. Discuss the terms listed below in detail by expanding on the definition as given and explaining in depth why these concepts are important to financial statements.
- Generally Accepted Accounting Principles (US GAAP);
- International Accounting Standards (IFRS);
- Securities and Exchange Commission (SEC);
- Annual report
- 10-K
Part II. Explain the accounting equation and prepare a table showing the equation and show a list of accounts belonging to each category in the equation. You may include five accounts for each category.
Part III. Comment on the primary intended audience of the financial statements. What other groups that may be interested in the financial information released by the company?
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Solution Summary
This solution provides an explanation of key regulatory bodies in the accounting industry, a definition of the accounting equation and the intended use for financial statements.
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PART I
I have provided here definitions of each of the terms with this amount of information you should find a recurring theme of full disclosure, accurate reporting and drive for consistency amongst the reporting entities. This information should assist you in formulating a response for part I. I have included my references after each related response.
Generally Accepted Accounting Principles (GAAP) is a common set of standards and procedures used in financial reporting. The purpose of GAAP is to provide continuity in reporting. By following GAAP the financial reports of different companies can be compared to each other, better enabling the end users to gage the financial health of any individual company. There are four organizations that are instrumental in developing financial accounting standards (GAAP) in the United States: Securities and Exchange Commission (SEC), American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB) and Government Accounting Standards Board (GASB).
GAAP consists of 4 basic assumptions and four basic principles. The four basic assumptions are economic entity, going concern, monetary unit and periodicity. The four basic principles are historical cost, revenue recognition, matching and full disclosure.
Reference:
Warfield, T. D., Weygant, J. J., Kieso, D. E. (2007). Intermediate Accounting: Principles and Analysis 2nd Edition. John Wiley & Sons, Inc. ...
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