The standards, procedures, and principles companies must...

Name: Problem 6, Chapter 3: Principles of Accounting Volume 1: Financial Accounting
Uploaded: 2020-04-15T14:06:54-08:00
Duration: 14 min 9 s
Channel: Puneet Prajapati
Description: The standards, procedures, and principles companies must follow when preparing their financial statements are known as which of the following? A. Financial Accounting Standards Board (FASB) B. generally accepted accounting principles (GAAP) C. Securities and Exchange Commission (SEC) D. conceptual framework

The standards, procedures, and principles companies must follow when preparing their financial statements are known as which of the following? A. Financial Accounting Standards Board (FASB) B. generally accepted accounting principles (GAAP) C. Securities and Exchange Commission (SEC) D. conceptual framework

The standards, procedures, and principles companies must follow when preparing their financial
statements are known as which of the following?
A. Financial Accounting Standards Board (FASB)
B. generally accepted accounting principles (GAAP)
C. Securities and Exchange Commission (SEC)
D. conceptual framework

Key Concepts

Standardization in Financial Reporting

Standardization in financial reporting refers to the uniform guidelines and practices that organizations adhere to when preparing financial statements. This process is essential for maintaining the accuracy and consistency of financial information across different entities, enabling investors, regulators, and other users to compare financial data effectively.

Generally Accepted Accounting Principles (GAAP)

GAAP is a collection of commonly accepted accounting rules, standards, and procedures that companies follow when compiling their financial statements. It ensures consistency, transparency, and comparability in financial reporting, allowing stakeholders to reliably assess a company’s financial health.

Transcript

00:01 Okay, so let's understand the solution from the example first of all.

00:08 So let's suppose we have entity like p, q and r.

00:44 So the r deals in clothing, it deals in construction, construction of houses, buildings, etc.

01:19 Etc and it is the p deals in fitness services now what happens to enable the transparency across the financial statements all all types of entity which is dealing different types of businesses services supplying goods and all that so to enable transparency in their financial statement preparation.

02:04 What happens? there are a set of some generally accepted accounting principles which all the entities need to follow all the entities.

02:17 All the entities, every entity needs to follow so that their financial statements will be prepared on a uniform basis.

02:29 What are what are such standards are called? they are known as which stands for generally accepted accounting principles these are the principles which every entity operating in the business environment need to other when preparing and statements know what such what's the standards of procedures they comprise let's understand that which is very very important there is principle of consistency it says every entity prepare financial statements based on consistent methods.

04:26 Consistent methods such as, let's say we have example of depreciation, depreciation method, investment valuation and many others.

05:02 Now what happens? when an entity follows the principle of consistency follows the principles of consistency the entity automatically enables its financial statements over the period of over the number of years to be able to get compared by different type of persons like investor stakeholder accounting authority monetary authority and many more it enables an investor or any other person to compare the financial statements which have been prepared on a consistent method.

05:47 Otherwise there will be anomaly in the financial statement and that will be inherent in nature.

05:54 Now let's move to our next principle under cap.

06:01 Principle of accrual...

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