What Are Generally Accepted Accounting Principles?

Businesses in widely varied industries all have the same fundamental financial concerns, and they all rely on trained accounting professionals to make sure that their books are in order. This is the reason for what are known as Generally Accepted Accounting Principles (GAAP). They act as a standardized set of guidelines that accountants follow when preparing financial statements. By adhering to GAAP, businesses can present their financial performance and position in a standardized format. This makes it easier for investors, regulators, and other stakeholders to compare and understand financial statements across different organizations. 

In this article, we’ll summarize Generally Accepted Accounting Principles and how you can start a career in the accounting field.

The 10 GAAP Rules

As previously stated, GAAP is a set of standardized guidelines for financial reporting and accounting that ensure businesses present their financial information in a way that’s reliable and easy to understand. They are often seen broken down into 10 rules.

1. Principle of Regularity: Accountants must use a widely accepted reporting system so that it can be easily understood.
2. Principle of Consistency: Accountants should stick with a certain accounting method instead of switching.
3. Principle of Sincerity: Financial data should be accurate, not intended to mislead anyone.
4. Principle of Permanence of Methods: Procedures for preparing reports should be consistent and understandable.
5. Principle of Non-Compensation: Financial reports should show full details of both debts and assets, not try to compensate (offset) one with the other.
6. Principle of Prudence: Financial data should be presented as it really is without trying to “spin” it to look better for the company.
7. Principle of Continuity: Reports should be prepared with the assumption that the business will keep operating.
8. Principle of Periodicity: Reports should be made based on a commonly accepted schedule, such as quarterly or annually.
9. Principle of Materiality: Financial reports should fully disclose the business’s real financial situation.
10. Principle of Good Faith: Anyone involved in preparing financial reports should act honestly.

Why Start a Career in Accounting?

Whether you work for a small business, a large corporation, an independent financial consulting firm, or even start your own accounting practice, the field of accounting offers various career paths. It’s a stable field, with the Bureau of Labor Statistics (BLS) projecting a job growth rate of 6% over the next decade.

Some of the benefits of a career in accounting include:

• Strong earning potential: Accountants can earn competitive salaries, with median pay exceeding $78,000 per year, according to the BLS.
• Job security: Accounting is a stable profession because businesses always need someone to handle their finances. 
• Transferable skills: The skills you learn in accounting, like data analysis and problem-solving, are valuable in many different fields if you decide to change career paths.

Prepare For Jobs in Accounting at ICT

If the advantages of a career in accounting appeal to you, but you’re not sure how to start, consider studying accounting at Interacting College of Technology. ICT offers both a diploma program and an associate degree program in accounting and professional business applications that can help you get the skills and knowledge you need to enter this rewarding field.  Topics covered include GAAP, common accounting software like Sage Accounting and QuickBooks Pro, and federal tax procedures. Enroll today or contact us for more information.