The principles of accounting that we conform to are the sames as agreed by the:
which is a basic accounting principle (or “GAAP”)
(i) basic accounting principles and guidelines,
(ii) detailed rules and standards issued by FASB
(iii) Generally accepted industry practices.
When a business shares its financial information with the public, it is necessary to follow ‘generally accepted accounting principles’ in generating these statements. The business and it’s auditors must certify that the financial information is in compliance with GAAP.
GAAP is useful as it will standardize the method of accounting.