![]() ![]() These acts established the Security Exchange Commission or the SEC and give it the power to create accounting standards in the United States. ![]() Congress passed the Securities Exchange Acts of 19. Soon after the stock crash in 1929, Congress designed to take action to help prevent investors from being deceived by fraudulent financial statements. GAAP is created by a private, independent seven-member board called the Financial Accounting Standards Board. The numbers and ratios will be meaningful because both companies used the same methods and techniques to prepare and present their balance sheets. This way an investor can compare a 2011 balance sheet of one company to the 2011 balance sheet of another company. This is useful because it maintains accounting consistancy through years and across companies. Every private company that issues financial statements to the public, must follow the rules of GAAP. These rules and concepts are called generally accepted accounting principles or GAAP. In the world of financial accounting, there are many different rules, concepts, and guidelines that govern how companies should account for financial transactions and present their financial statements. Let’s take a basic look at how US accounting standard are made and who makes them. Learning the accounting principles will not only help you understand basic accounting, it will help you analyze transactions in the future. In order to learn accounting, understand certain transactions, and analyze financial statements, it is important to take a step back and study the accounting principles that are underneath all of the debits and credits. ![]()
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