Generally Accepted Accounting Principles (GAAP) Assignment

Generally Accepted Accounting Principles (GAAP) - Assignment Example The Generally Accepted Accounting Principles (GAAP), are used by the accountants to record and report accounting information. The set of principles have been developed over the year by the accounting profession and the Securities and Exchange Commission (SEC). The laws that give the SEC that authority to establish, reporting and disclosure requirement, include the two laws which are: The Securities Act of 1933 and the Securities Exchange Act of 1934. There are certain assumptions upon which the current set of principles operates (Cliff, 2013). These assumptions and the principles are normally considered to be GAAP and some of them are as discussed below: This assumes that each financial entity is to be maintained separately for each economic entity. The economic entities include social organizations which are together with schools, churches, districts, governments and businesses among others. This goes that, there are certain economic events that affect companies and are not easily quantified in monetary terms such as introducing a new product or hiring a new CEO. These then do not, most of the times, appear on the company’s records. Therefore, accounting records are required to be made through the use of a stable currency, for instance, the US uses dollars. This principle requires that, a full disclosure should be made on the financial statements of a company’s finances or assets pending lawsuit, incomplete transactions of a company, or any other important financial information about the company. In this case, footnotes should be used to supplement financial statements in order to convey such kind of information. This requires that, artificial time should be used to record and report the results of the activities of a business. This artificial time normally leads to questions on when certain transactions should be recorded. The accountants then use the GAAP to record and report the established accounting period of transaction. This principle