Essay: Accounting Process and Financial Statements

Sample Essay

Generally Accepted Accounting Principles – GAAP is a collection of techniques, principles, concepts and methods to record, classify, interpret, communicate and present financial information to stakeholders or users of this information. The GAAP implemented in United States of America is referred to as US GAAP and the principles in US GAAP are formulated and amended by the Financial Accounting Standards Board – FASB.

A financial Statement prepared using US GAAP is deemed to be reliable and consistent. The financial statements which are prepared using GAAP are accepted throughout the world as a reliable source of company information. Although financial statements which are not prepared under GAAP present financial information but they are not as a base for making important decisions. Banks only lend money and investors only invest money into companies which have prepared financial statements using GAAP (Walther, chapter 15: Financial Reporting and Concepts, 2009).

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