GAAP Term Paper Example | Topics and Well Written Essays - 500 words

GAAP - Term Paper Example These rules are widely accepted and used as a popular accounting method. â€Å"GAAP is established by the Financial Accounting Standards Board†. (InvestorWords2011) The GAAP first became a popular accounting method in the 1930’s and has been a popular method ever since. GAAP works in many different ways. The GAAP is not a required way of accounting but is preferred by many. GAAP is a way for companies to have their finances written out. The GAAP method is important and helps to insure accuracy and honesty. When businesses use the same accounting method it makes it easy to record and access materials. Statements prepared within this method are prepared with strict standards. Following standards for the GAAP method make it harder for accountants to have a chance for embezzlement or fraud. Accountants using the GAAP as a way to produce statements have very little room for error. When accountants do not use this method is when one should worry about the accuracy of the documents. It is important to remember that GAAP is a set of standards that must be followed. (Investopedia2011) Standards and rules for the GAAP are very important for creating financial documents. Financial documents prepared according to this method show accountants a specific way to prepare the documents. The rules show how to show an income, loss and many other accounting statements. There are over 100 rules that show different methods of reporting transactions. These methods are evaluated by the Financial Accounting Standards Board. This board regulates and exams the rules set out by the GAAP. There are many pros and cons to using the GAAP method. The method offers many positive things to the world of accounting. Before the GAAP there was never really a set method to creating financial documents. The GAAP rules and standards allow those preparing financial documents to prepare documents in the same manner. Preparing documents in the same manner can allow other