what is gaap and explain classification of principles
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Answer:
Generally Accepted Accounting Principles (GAAP) refers to a widely accepted set of rules, standards, conventions, and procedures for reporting financial info. ... The things covered by GAAP include revenue recognition, measuring outstanding share, and classification of items on balance sheet
classification of pprinciple are
These 10 general principles can help you remember the main mission and direction of the GAAP system.
1.) Principle of Regularity
The accountant has adhered to GAAP rules and regulations as a standard.
2.) Principle of Consistency
Professionals commit to applying the same standards throughout the reporting process to prevent errors or discrepancies. Accountants are expected to fully disclose and explain the reasons behind any changed or updated standards.
3.) Principle of Sincerity
The accountant strives to provide an accurate depiction of a company’s financial situation.
4.) Principle of Permanence of Methods
The procedures used in financial reporting should be consistent.
5.) Principle of Non-Compensation
Both negatives and positives should be fully reported with transparency and without the expectation of debt compensation.
6.) Principle of Prudence
Emphasizing fact-based financial data representation that is not clouded by speculation.
7.) Principle of Continuity
While valuing assets, it should be assumed the business will continue to operate.
8.) Principle of Periodicity
Entries should be distributed across the appropriate periods of time. For example, revenue should be divided by its relevant periods.
9.) Principle of Materiality / Good Faith
Accountants must strive for full disclosure in financial reports.
10.) Principle of Utmost Good Faith
Derived from the Latin phrase “uberrimae fidei” used within the insurance industry. It presupposes that parties remain honest in transactions.