Basic Accounting Concepts

Explaining Basic Accounting Concepts and Business Structures

Tammy J. DeVaughn

ACC/537

October 21, 2012

Instructor Steven Hall

Explaining Basic Accounting Concepts and Business Structures

There are relevant sources to help business owners and managers analyze and interpret the standards of accepting accounting principles common in different industries and will assist in the day-to-day operations, including nonprofits, publically traded, corporations, partnerships, and sole proprietorships. The accounting concepts are divided into four basic topics: the first topic identifies the hierarchy of sources for generally accepted accounting principles; the second topic describes effective accounting information using the qualities of accounting. The third topic compares and contrast accrual basis and cash basis of accounting, and the fourth topic differentiate among various business structures.

GAAP Hierarchy

Generally Accepted Accounting Principles (GAAP) is concepts of principles and procedures developed primarily by the Financial Accounting Standards Board (FASB), which defines and categorizes the sources of (GAAP). In addition to FASB as a primary source the Security and Exchange Commission (SEC), and accounting practices developed by respected industries both public and private over time are also sources.

The major sources of GAAP are FASB standards, interpretations, and staff positions; Accounting principles board (APB) Opinions, and American Institute of Certified Public Accountants (AICPA). GAAP’s Hierarchy of Authority: Category A, the most authoritative, consists of Financial Accounting Standards Board (FASB) Standards, Interpretations, and Staff Positions; Accounting Principles Board (APB) Opinions, and AICPA Accounting Research Bulletins. The accounting principles are updated annually and published by FASB. Category B, consist of FASB Technical Bulletins and if cleared FASB, AICPA Industry Audit and...