This document provides an overview of 12 generally accepted accounting principles (GAAP): 1) Economic entity assumption 2) Monetary unit assumption 3) Time period concept 4) Cost principle 5) Full disclosure principle 6) Continuing concern concept 7) Consistency principle 8) Revenue recognition convention 9) Objectivity principle 10) Conservatism 11) Matching principle 12) Materiality. Each principle is briefly defined in 1-2 sentences.

1. Submit To Sir Adeel Nasir
Saad Ahmad Khalid 41
Shahab Hussain 18
Faizan Rasool 13
Hassan Nawaz 42
Haroon Rasheed 40
General Accepted Accounting
Principle

2. 1.Economic entity assumption 7.Matching principle
2.Monetary unit assumption 8.The revenue recognition
convention
3.The time period concept 9.Materiality principle
4.The cost principle 10.The principle of conservatism
5.The full disclosure principle 11. The objectivity principle
6.The continuing concern 12.The consistency principle
concept
Generally excepted accounting
principles(GAAP)

3.  Generally Accepted Accounting Principles. A widely accepted set
of rules, conventions, standards, and procedures for
reporting financial information, as established by the Financial
Accounting Standards Board.
The common set of accounting principle, standards and
procedures. Combination of authoritative standard set by policy
boards and simply, the commonly accepted ways.
 GAAP is an international convention of good accounting practices.
It is based on the following core principles
GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (G.A.A.P)

4. 1.The Revenue Recognition Convention
The revenue recognition convention provides
that revenue be taken into the accounts
(recognized) at the time the transaction is
completed. Usually, this just means recording
revenue when the bill for it is sent to the
customer. If it is a cash transaction, the revenue
is recorded when the sale is completed and the
cash received.

5.  It is important to take revenue into the accounts properly. If
this is not done, the earnings statements of the company will
be incorrect and the readers of the financial statement
misinformed
It is not always quite so simple. Think of the building of a large
project such as a dam. It takes a construction company a
number of years to complete such a project. The company
does not wait until the project is entirely completed before it
sends its bill. Periodically, it bills for the amount of work
completed and receives payments as the work progresses.
Revenue is taken into the accounts on this periodic basis.

6.  The principle of conservatism provides that
accounting for a business should be fair and
reasonable. Accountants are required in their work to
make evaluations and estimates, to deliver opinions,
and to select procedures. They should do so in a way
that neither overstates nor understates the affairs of
the business or the results of operation.

2.The Principle of Conservatism

7.  The continuing concern concept assumes that a
business will continue to operate, unless it is known
that such is not the case. The values of the assets
belonging to a business that is alive and well are
straightforward.
3.The Continuing Concern Concept

8.  a supply of envelopes with the company's name
printed on them would be valued at their cost. This
would not be the case if the company were going out
of business. In that case, the envelopes would be
difficult to sell because the company's name is on
them. When a company is going out of business, the
values of the assets usually suffer because they have
to be sold under unfavourable circumstances. The
values of such assets often cannot be determined
until they are actually sold.
For example,

9. 4.The Full Disclosure Principle
The full disclosure principle states that any and all
information that affects the full understanding of a
company's financial statements must be include with the
financial statements. Some items may not affect the
ledger accounts directly. These would be included in the
form of accompanying notes.
Examples of such items are outstanding lawsuits, tax
disputes, and company takeovers

10.  The consistency principle requires accountants to apply
the same methods and procedures from period to period.
When they change a method from one period to another
they must explain the change clearly on the financial
statements. The readers of financial statements have the
right to assume that consistency has been applied if there
is no statement to the contrary.
 The consistency principle prevents people from changing
methods for the sole purpose of manipulating figures on
the financial statements.

5.The Consistency Principle

11. 6. Monetary Unit Assumption
Economic activity is measured in U.S. dollars, and
only transactions that can be expressed in U.S.
dollars are recorded.
Because of this basic accounting principle, it is
assumed that the dollar's purchasing power has not
changed over time. As a result accountants ignore
the effect of inflation on recorded amounts.
For example, dollars from a 1960 transaction are
combined (or shown) with dollars from a 2014
transaction.

12. 7. Economic Entity Assumption
The accountant keeps all of the business transactions of a
sole proprietorship separate from the business
owner's personal transactions. For legal purposes, a sole
proprietorship and its owner are considered to be one
entity, but for accounting purposes they are considered
to be two separate entities.

13. 8.The Time Period Concept
The time period concept provides that accounting take
place over specific time periods known as fiscal periods.
These fiscal periods are of equal length, and are used
when measuring the financial progress of a business.

14. There are times when the above type of objective
evidence is not available. For example, a building
could be received as a gift. In such a case, the
transaction would be recorded at fair market value
which must be determined by some independent
means.

15.  The objectivity principle states that accounting will be
recorded on the basis of objective evidence. Objective
evidence means that different people looking at the
evidence will arrive at the same values for the transaction.
Simply put, this means that accounting entries will be based
on fact and not on personal opinion or feelings.

9.The Objectivity Principle

16. 10.The Cost Principle
The cost principle states that the accounting for
purchases must be at their cost price. This is the
figure that appears on the source document for
the transaction in almost all cases. There is no
place for guesswork or wishful thinking when
accounting for purchases.
The value recorded in the accounts for an asset
is not changed until later if the market value of
the asset changes. It would take an entirely new
transaction based on new objective evidence to
change the original value of an asset.

17.  This accounting principle requires companies to use
the accrual basis of accounting. The matching
principle requires that expenses be matched with
revenues. For example, sales commissions expense
should be reported in the period when the sales were
made (and not reported in the period when the
commissions were paid). Wages to employees are
reported as an expense in the week when the
employees worked and not in the week when the
employees are paid.
11. Matching Principle

18. Because we cannot measure the future economic
benefit of things such as advertisements (and
thereby we cannot match the ad expense with
related future revenues), the accountant charges the
ad amount to expense in the period that the ad is
run.

19. 
Because of this basic accounting principle or guideline, an accountant might be
allowed to violate another accounting principle if an amount is insignificant.
Professional judgment is needed to decide whether an amount is insignificant or
immaterial.
 An example of an obviously immaterial item is the purchase of a $150 printer by a
highly profitable multi-million dollar company. Because the printer will be used for five
years, the matching principle directs the accountant to expense the cost over the five-
year period. The materiality guideline allows this company to violate the matching
principle and to expense the entire cost of $150 in the year it is purchased. The
justification is that no one would consider it misleading if $150 is expensed in the first
year instead of $30 being expensed in each of the five years that it is used.
 Because of materiality, financial statements usually show amounts rounded to the
nearest dollar, to the nearest thousand, or to the nearest million dollars depending on
the size of the company.
12. Materiality