GAAP is an acronym for Generally Accepted Accounting Principles, which are a set of guidelines that public accounting firms use to maintain the integrity of financial statements. It was created in response to the need for standardization following the Great Depression and World War II. In addition, USGAAP is the acronym for United States Generally Accepted Accounting Principles. USGAAP is a set of accounting principles that are used in the United States and many other countries.
The accounting principles are guidelines for how to keep records and prepare reports about a company’s financial activities. However, GAAP does not dictate what should be reported in the financial statements, but rather it specifies how to report them. It is composed of several sets of standards that are published by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
Problems with GAAP Compliance & Why You Must Follow It
GAAP compliance is very important for any company that wants to stay in the good books of the Securities and Exchange Commission (SEC). It is a set of accounting standards that all publicly traded companies must follow.
The three main reasons why you should follow GAAP compliance are:
-To maintain your reputation with investors and stakeholders.
-To avoid fines from the SEC.
-To maintain continuity with other financial statements.
How to Monitor Your Company’s GAAP Compliance Status?
There are many ways to monitor your company’s GAAP compliance status. One way is by having a quarterly review of your financial statements, which should be conducted by an independent auditor. Another way would be to have an online GAAP Compliance Monitoring Service that will send you alerts when something needs to be addressed. What if you want more control? You can also periodically review the list of transactions that are involved in GAAP compliance, which can be done with the help of transaction logs and journals.
Accounting standards rules vary from state to state. below provide a list of the GAAP rules in each state and their corresponding links to the specific accounting standard requirements.
The following is a list of some states and the GAAP rules that they require:
Alabama: http://www.acctgweb.com/Docs/Alabama_GAAP_Standards_Requirements.pdf
Alaska: http://www.acctgweb.com/Docs/Alaska_GAAP_Standards_Requirements.pdf
Arizona: http://www.acctgweb.com/Docs/Arizona_GAAP_Standards_Requirements-1-.pdf
Arkansas: http://www.acctgweb.com/Docs/Arkansas%20GAAP%20Standards%20Requirements%20-1-.pdf
Does managerial accounting or cost accounting require GAAP?
The answer should be NO. Managerial or Cost accounting is used internally in an organization by leader team and managers to assist with planning, decision making and budgeting. GAAP is not required when using accounting data for internal purposes.
