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048 | Topic of the Month - GAAP - Part 2

Updated: Nov 19

In our last post, we announced the Hot Topic of the Month - #GAAP - and briefly outlined its definition.


In our second post in this series, we will discuss the 4 Principles of GAAP to share a better understanding of what it means for #Entrepreneurs and business owners.


The 4 basic principles of GAAP are:

  • Costs

  • Revenues

  • Matching

  • Disclosures

Costs

The cost principle requires that the actual cost of assets be recorded instead of recording the cost based on market values or adjusting for inflation.


Revenue

The revenue principle requires that revenues be recorded at the time they are earned, not when the payment is received.


Matching

The matching principle requires that expenses need to be matched with the revenues related to them.


Disclosure

The disclosure principle requires that all financial information be clear and easy to understand for all individuals, and the disclosure must be balanced against the costs associated with producing said disclosures.


In our next post, we'll expand on each of the 4 principles.


And as always, we are here to help! Contact Us with your questions.


#bigrose #bookkeeping #SMB #accounting



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