Accounting Principles

If everyone involved in the process of accounting followed their own system, or no system at all, there is no way to really know if a company was profitable or not. Most companies follow what are called generally accepted , or GAAP accounting principles , and there are huge volumes in libraries and bookstores devoted to this topic alone. If the company provides otherwise, anyone reading a financial statement can make the assumption that the company has used GAAP.
If GAAP are not the principles used in the preparation of financial statements , a company must specify which other form of accounting they're used and are bound to avoid using titles in its financial statements that could mislead question person.
GAAP are the gold standard for preparing financial statements. Non-disclosure he used principles other than GAAP makes a legally responsible for misleading or misunderstood company data . These principles have been refined over decades and have effectively led the accounting policies and financial reporting systems in enterprises . Different principles have been established for different types of business entities , including for-profit , nonprofit , businesses , governments and other businesses.
PCGA not cut and dried . They are guidelines and as such are often open to interpretation. Estimates must be made sometimes , and require good faith efforts for accuracy. You've probably heard the phrase "creative accounting" and this is when a company pushes the envelope a little ( or a lot) to make your business more profitable than it could be. It is also called massaging the numbers . This can get out of control and quickly turn into accounting fraud , which is also called cookbooks. The results of these practices can be devastating and ruin hundreds of thousands of lives , as in the case of Enron , Rite Aid and others.