Generally Accepted Accounting Principles
The Business Entity Principle
Each business is considered a separate entity. Financial data for the business is kept
separate from the owner’s personal financial data.
The Cost Principle
Assets are valued and recorded according to their actual cost to the business.
The Time Period Principle
Each company sets and defines an accounting period. The company consistently uses
the same time period when it prepares its financial statements.
The Matching Principle
The costs recorded in the expense accounts should be matched with the revenue of the
same accounting period to determine net income.
The Principle of Objectivity
Accounting records are based on objective evidence. Source documents provide
objective evidence to support the value used to record transactions.
The Principle of Materiality
Information that could affect the decisions of users of financial statements must be
included when the financial statements are prepared.
The Principle of Conservatism
Where there are acceptable alternative accounting treatments for an item, accountants
choose the one that will result in lower net income and net assets.
The Full Disclosure Principle
All information needed for a full understanding of a company’s financial statements
must be included with the financial statements. (e.g. outstanding lawsuits, tax
disputes, company takeovers.)
The Going Concern Concept
The business will continue to operate, unless it is known that it will not.
Generally Accepted Accounting Principles
Match the definition to the correct GAAP.
A
B
C
D
E
AB
AC
AD
AE
The
The
The
The
The
The
The
The
The
Matching Principle
Business Entity Principle
Time Period Principle
Principle of Objectivity
Going Concern Concept
Principle of Materiality
Principle of Conservatism
Cost Principle
Full Disclosure Principle
B
Each business is considered a separate entity. Financial data for the
business is kept separate from the owner’s personal financial data.
AD
Assets are valued and recorded according to their actual cost to the
business.
C
Each company sets and defines an accounting period. The company
consistently uses the same time period when it prepares its financial
statements.
A
The costs recorded in the expense accounts should be matched with the
revenue of the same accounting period to determine net income.
D
Accounting records are based on objective evidence. Source documents
provide objective evidence to support the value used to record transactions.
AB
Information that could affect the decisions of users of financial statements
must be included when the financial statements are prepared.
AC
Where there are acceptable alternative accounting treatments for an item,
accountants choose the one that will result in lower net income and net
assets.
AE
All information needed for a full understanding of a company’s financial
statements must be included with the financial statements. (e.g.
outstanding lawsuits, tax disputes, company takeovers.)
E
The business will continue to operate, unless it is known that it will not.
BAF3M1
Name: _______________________________
Generally Accepted Accounting Principles
Match the definition to the correct GAAP.
A
B
C
D
E
AB
AC
AD
AE
The
The
The
The
The
The
The
The
The
Matching Principle
Business Entity Principle
Time Period Principle
Principle of Objectivity
Going Concern Concept
Principle of Materiality
Principle of Conservatism
Cost Principle
Full Disclosure Principle
Each business is considered a separate entity. Financial data for the
_________ business is kept separate from the owner’s personal financial data.
Assets are valued and recorded according to their actual cost to the
_________ business.
Each company sets and defines an accounting period. The company
_________ consistently uses the same time period when it prepares its financial
statements.
The costs recorded in the expense accounts should be matched with the
_________ revenue of the same accounting period to determine net income.
Accounting records are based on objective evidence. Source documents
_________ provide objective evidence to support the value used to record transactions.
Information that could affect the decisions of users of financial statements
_________ must be included when the financial statements are prepared.
Where there are acceptable alternative accounting treatments for an item,
_________ accountants choose the one that will result in lower net income and net
assets.
All information needed for a full understanding of a company’s financial
_________ statements must be included with the financial statements. (e.g.
outstanding lawsuits, tax disputes, company takeovers.)
_________ The business will continue to operate, unless it is known that it will not.