Basic Accounting Concepts and Business Structures Essay
July 25, 2010
Basic accounting concepts and business structures go hand-in-hand. Usually the business structure will determine the type of accounting concepts it will use. Generally accepted accounting principles (GAAP) are needed for effective accounting information.
Basic Accounting Concepts and Business Structures
Basic accounting concepts and business structures are important to a business’s success. Using generally accepted accounting principles (GAAP) brings a standard to financial statements. There must also be effective accounting information. A company can choose to use cash basis accounting or accrual basis …show more content…
Hierarchy of Sources The sources with the most authority are FASB Standards, Interpretations, and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins. The next in line are FASB Technical Bulletins, AICPA Industry Audit and Accounting Guides, and AICPA Statements of Position. Then come FASB Emerging Issues Task Force and AICPA AcSEC Practice Bulletins. The least authoritative is AICPA Accounting Interpretations, FASB Implementation Guides (Q & A), and widely recognized and prevalent industry practices. If there is a conflict between two different levels of authority, the one with the most authority should be the principle used.
Effective Accounting Information Accounting information has many qualities that should be considered when making a sound financial decision. Understandability is very important for the decision maker. If someone cannot understand the financial statements, he will not be able to make an informed decision about the company. The information also needs to be relevant. It needs to