Ch. 2: GAAP and Setting Standard Bodies

Question 1

What is GAAP?

Answer 1

Generally Accepted Accounting Principles (in these flash cards we will be going over the U.S.‘s GAAP)

These are rules to follow when we are preparing financial statements.

Question 2

Financial accounting is governed by concepts and rules known as ————- ——— ——— ———— ().

Answer 2

generally accepted accounting principles (GAAP). They are not set in stone, they are generally accepted.

GAAP aims to make information:
relevant (meaning relevant information affects decisions of users)

reliable ( reliable information is trusted by users; it’s not bias; it’s not favoring one group over the other; it’s complete and gives me everything I need to know)

comparable (comparable information is helpful in contrasting organizations)

Question 3

Who sets GAAP (who are the standard setting bodies)?

Answer 3

• Financial Accounting Standards Board (FASB) (this is a private organization; not public or a government organization)
• Securities and Exchange Commission (SEC) (government oversight) (oversees the financial market and the accounting standard