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Basic Accounting Concepts

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Basic Accounting Concepts and Business Structures
ACC/537
August 13, 2012 Sources of GAAP and Source Hierarchy
According to our textbook Financial Accounting, “General Accepted accounting principles (GAAP) have substantial authoritative support. The American Institute of Certified Public Accountants (AICPA’s) code of professional conduct requires that members prepare financial statements in accordance with GAAP. Specifically rule 203 of this code prohibits a member from expressing an unqualified opinion for financial statements that contain a material departure from general accepted accounting principles” (Kimmel, Weygandt & Kieso, 2007, p. 12).
According to (Kieso, Weygandt, & Warfield, 2007), General Accepted Principles (GAAP) are an established common set of accepted accounting principles procedures, and standards made over time by the AICPA, a national professional organization of practicing Certified Public Accountants (CPA’s). Because of the industrial growth, its capital markets and after the great depression of 1929, the federal government established the Security and Exchange Commission (SEC) to protect stockholders investments. However, the SEC discovered that many non-public trade organizations did not fall under their security laws and their jurisdiction and they developed a two part sectors, AICPA, and the Financial Accounting Standard Board (FASB) to establish, and improve accounting standards and principles.
The FASB is working on a standard that defines the meaning of GAAP called, the Hierarchy of GAAP, to identify accounting principles sources and structure for choosing the financial statement principals that should be used when their prepared, this falls under four categories. The major sources of the GAAP and the most authoritative, are the FASB standards interpretations, and staff positions; APB opinions, and the AICPA accounting

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