Paper

Explaining Basic Accounting Concepts

Bridni Hunter

ACC/537

April 11, 2011

Michael D. Collins, CPA, JD, LLM

Sources of Generally Accepted Accounting Principles

Generally accepted accounting principles are common standard procedures that can either have an accounting rule-making body that “has established a principle of reporting or a given practice has been accepted as appropriate”.(Keiso, Weynant, & Warfield 2007). There are four organizations that make up the financial standards accounting [GAAP]: Securities and Exchange Commission, American Institute of Certified Public Accountants, Financial Accounting Standards Board, and Government Accounting Standards Board, which are the main developers of the FAS. Securities and Exchange Commission is a federal agency that was made to help develop and normalize financial information. American Institute of Certified Public Accountants was a huge develop when they appointed to the Committee on Accounting Procedure to compose and issue Accounting Research Bulletins, by which was changed to the Accounting Principles Board. Financial Accounting Standards Board is considered as “the major organization” with a mission establishes and improves financial information. (Keiso, Weygant, &Warfield 2007). Finally, Government Accounting Standards Board’s mission is similar to that of the Financial Accounting Standards Board except it is based on state and local government accounting information FASB deals with all other entities.

Three major sources of GAAP are as follows: FASB standards, interpretation, and staff positions; APB Opinions; and AICPA Accounting Research Bulletins. These sources structure a hierarchy for GAAP identifies each one as well as the framework for selecting the exact principles to be used in the financial statements. (Keiso, Wygant, & Warfield). The hierarchy lists sequential sources that a company should look to for guidance in regards to accounting information. Also, the hierarchy gives a sense...