Accounting Standards

Question 1

What does GAAP stand for?

Answer 1

Generalized Accepted Accounting Principles

Question 2

What is the GAAP?

Answer 2

• Specific rules, practises, guidelines, accountants follow
• Canadian Institute of Chartered Accountants (CICA) is the organization that establishes the standards
• CICA handbooks contain all GAAP’s and is updated regularly

Question 3

Why is GAAP important?

Answer 3

• Used to prepare financial statements
• Provides standards/guidelines and follows for uniformity

Question 4

Business Entity Concept

Answer 4

• Accounting of the business must be kept separate with the accounting of the individual
• Personal assets cannot be put on business balance sheet
• Personal expenses cannot be put on business income statement

Question 5

Continuing Concern Concept

Answer 5

• The assumption that the business will continue to exist until known otherwise

Question 6

Cost Principle

Answer 6

• Assets are recorded on the balance sheet based on the purchase price or original cost

Question 7

Revaluation Model

Answer 7

• Assets can be recorded based on the market value if sufficient evidence exists
• Ex. Value of building can be reassessed based on professional appraiser

Question 8

What are the 2 important GAAP’s

Answer 8

ASPE/ IFRS