GAAP rules:

Accounting/business entity concept:

A corporation or business keeps its accounting separate from owner's transactions.



Going concern concept:

Assum a company/corporation will continue in existence unless otherwise stated. Thus, assets are still valued @ historical cost (purchase price).

Time period concept:

The users of financial statements will be analyzing statements that fall within a specific fiscal period. All statements will be reported in a timely manner.

Asset valuation: Historical cost:

All assets are valued @ their purchase price + any additional costs to bring it to running order.



Revenue recognition principle:

To recognise revenue in the time period in which it was earned, regardless of the exchange of cash.



Matching principle:

To match the expenses to the revenues in the time period they occurred, regardless of the exchange of cash.



Disclosure principle:

Any info that affects the decision making of the financial statements must be disclosed in the company's note to financial statements. E.g. inventory valuation & tracking types, depreciation method, pending lawsuits, unused lines of credit.

Materiality concept:

Any transaction or piece of info, that is 'material' in value compared to a company's assets & profits should be disclosed in the financial statement.



Stable dollar assumption

The value of a dollar is assumed to be constant over time, regardless of changes in its buying power.

Objectivity principle

All measurements in dollar values are calculated using methods that are as universally acceptable and logical as possible, to ensure that the figures are reliable.

Consistency principle

The methods used to calculate values for the financial statements should not be changed randomly and must be fully disclosed when they are changed.

Conservation

To prevent providing misleading information on the financial statements, the worst case scenario is always presented.