BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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GAAP is a set of rule-based accounting standards established by the Financial Accounting Standards Board (FASB).
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GAAP sets out the standards, conventions, and rules that accountants must follow when preparing audited financial statements.
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GAAP is complex, providing more than 150 “pronouncements” as to how to account for different types of transactions.
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All of the statements above are true.
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Detailed explanation-1: -Which of the following is not true of generally accepted accounting principles? GAAP does not have substantial authoritative support.
Detailed explanation-2: -Which of the following is true of generally accepted accounting principles? GAAP includes detailed practices and procedures as well as broad guidelines of general application, GAAP is influenced by pronouncements of the SEC and IRS, and GAAP changes over time as the nature of the business environment changes.
Detailed explanation-3: -The four basic constraints associated with GAAP include objectivity, materiality, consistency and prudence. Objectivity includes issues such as auditor independence and that information is verifiable.
Detailed explanation-4: -Which of the following is not a generally accepted accounting principle relating to the valuation of assets? The safety principle-assets are valued at no more than the value for which they are insured.