Essay about Accounting Principles And Financial Statements

762 Words Mar 29th, 2016 4 Pages
The Generally Accepted Accounting Principles also known as GAAP was adopted by the U.S. Securities and Exchange Commission (SEC). GAAP is a set of accounting principles public companies have to follow when preparing financial statements that are useful for creditors and investors. Financial Accounting Standards Board (FASB) has developed a framework to increase the effectiveness of disclosure footnotes. The financial disclosures can be required by GAAP or by the management team when preparing the financial statements. The disclosure notes in the financial statements are explanatory and supplemental notes that accompany the financial statements issued by an entity. This financial report will discuss the purpose of disclosure notes, the disclosure notes required for a summary of significant accounting policies, subsequent events, and related party transactions. The purpose of disclosure notes is to improve the effectiveness in the financial statements by clearly communicating the information that is most important to users of each entity’s financial statements. The disclosure notes should be relevant in making decisions about the entity. Most disclosure notes include all information that cannot be presented in the face of income statement, balance sheet, statement of cash flows, and statement of stockholder’s equity. Disclosure notes can include information about the entity going in debt, if the entity has changed an accounting method, and it can also include accounting…

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