Generally Accepted Accounting Principles (GAAP) are essential rules for preparing and presenting financial statements, ensuring accuracy and comparability across companies. These principles enable long-term financial decision-making and maintain credibility with third parties like creditors and shareholders. Key principles include historical cost, prudence, full disclosure, consistency, revenue recognition, and periodicity, all contributing to transparent and reliable financial reporting.

1. Syed Behroz Ali Rizvi

2. G.A.A.P
•
•
•
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G generally
A accepted
A accounting
P principles

3. Outline
 What is G.A.A.P?
 Why these principles are necessary to
follow?
 Third party satisfaction
 Principles
 Conclusion

4. What is G.A.A.P?
Generally Accepted Accounting Principles are the set of
rules and regulations through firms and corporations
prepare and present their assets and liabilities and all
incomes and expenses in financial statements.

5. Why these principles are necessary
to follow?
These principles are necessary to follow because it helps a
lot in making long term decisions, financial decisions and
maintaining records. It makes easy to compare financial
statements of different companies.

6. Third Party Satisfaction
Third parties like
creditors, banks, share
holders etc must have
to rely on reported
financial statements
so it must be free of
errors, inconsistency
and bias .It could only
be possible by
following G.A.A.P.

7. Historical Cost Principle
It means that fixed assets must be reported in
financial statements on the cost on which they
were purchased.
Fixed assets should not be recorded on their
market value.
Book Value + Depreciation = Cost

8. Principle Of Prudence
In the principle of
prudence any person
should not try to
make things look
prettier than they are
originally. One must
not exaggerate any
thing.

9. Principle Of Full Disclosure
All necessary information must be reported
in the financial statements.

10. Principle Of Consistency
It means that when business has fixed
a method for the treatment of an
item, so it should include all items
that follow in same manner.

11. Revenue Recognition Principle
According to this principle revenues are
recognized if realized or realizable or if
goods transferred or services rendered, no
matter cash is received or not.

12. Monetary Unit Principle
• It means that the accounting records must be
kept or defined in monetary units i.e. currency.

13. Principle Of Periodicity

Each and every
accounting entry
should be allocated a
defined accounting
period.
Financial
Statement
2011
Rent Paid For
The Month Of
January 2011
Insurance
Premium
Paid For
January
To
June 2011
Wages Paid For
The
Month Of
February 2011

14. Matching Principle
► Matching
principle defines that we must charge
the expenses for any particular period against the
revenues of that particular period.
Expenses  2011
Revenues  2011

15. I have concluded that generally accepted accounting
principles are necessary for smooth working of
accounting work and specially helpful for
creditors, insurers and all stake holders.

16. Questions & Queries
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

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presentation
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