Project 2

Project 2: Generally Accepted Accounting Principles (GAAP)

 

What I Need to Know

 

Accountants follow principles and prescribed guidelines to assist them in their work. These are called Generally Accepted Accounting Principles, or GAAP for short. You may have noticed that some of the positions you found in the newspaper or on the Internet in Project 1 required the applicant to have a knowledge of GAAP.

 

Why Is This Important?

 

You are already familiar with the need for rules or guidelines when you are playing a sport or game. These rules help you know what you are able to do, how you are doing, and who is winning. Similarly, GAAP principles were developed as a result of the increased use of accounting by corporations and the need for all corporations to follow the same basic guidelines. This consistency allows the financial records of a business to be compared from year to year or from company to company, since all companies must play by the same rules or guidelines.

In Canada, the Canada Business Corporation Act and the corresponding statutes of the various provinces demand the use of the term Generally Accepted Accounting Principles in the reports presented at the annual meetings of shareholders. The term is incorporated in the auditor’s statement. An auditor is a professional accountant who deals with analysis of books and records. The auditor’s wording may be similar to the following:

In our opinion, the accompanying balance sheet and income statement present fairly the financial position of Anchors Fisheries as at the December 31, 20xx, and the results of its operations for the year then ended, in conformity with Generally Accepted Accounting Principles applied on a basis consistent with that of the preceding year.

What Do I Need to Do?

 

To help you decide where and when to record various financial information for a company, it is necessary for you to become familiar with the main GAAP principles. Explore these principles in the Time to Work below.

 

Time to Work

 

The following project will introduce you to the main principles of GAAP through case studies. Understanding these principles is fundamental to your success in this course. Complete the questions at the end of each case study and save them in your FIN1015 Course Folder for your teacher to mark. Please check with your teacher for instructions regarding where to save assignments for assessment.

 

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