Generally Accepted Accounting Principles (GAAP)Financial Dictionary -> General Finance -> Generally Accepted Accounting Principles (GAAP)
The main principals that ensure fair and accurate, free from inconsistencies accounting are listed and explained below:
1) Regularity: to ensure books and accounts are updated in a timely manner, but more importantly that tax returns and information is provided within the time given.
2) Consistency: accounting methods and techniques must remain the same throughout the financial year to remain consistent.
3) Sincerity: accountants should remain truthful and accurately express the true financial stability of their client(s) without excessive window dressing and PR.
4) Permanence of Methods: financial information and the methods used must be clear and presented coherently.
5) Non Compensation: all financial information must be present and therefore a negative must not be compensated by a positive; both must be shown in full.
6) Prudence: accounts should know reality and shouldn't list financial data that is based on probability or assumption.
7) Continuity: it is accepted that over time an assets value changes and it is fair to represent this with depreciation.
8) Periodicity: revenue should be allocated over the entire span of its income/expenditure and not just on the final date of a transaction. For example a subscription has several payments.
9) Full Disclosure & Materiality: absolutely everything financially related to the business must be presented in the records.
All countries have their own variation of these guidelines, but are generally the same.