Modern accounting and financial reporting standards are in place to enhance efficiency and public accountability within our democratic system of government. Adherence to modern accounting standards is a requirement of business accountants. The implementation of modern accounting standards improves efficiency and transparency in both the private and public sectors.
Generally Accepted Accounting Principles (GAAP)
The American Institute of Certified Accountants (AICPA) established a universal Code of Professional conduct that governs modern accounting. The code establishes a set of rules that specify how accounting records should be kept in modern accounting. This modern standard of rules is called General Accepted Accounting Principles. The Securities and Exchange Commission (SEC) makes conformity to GAAP standards mandatory of all publicly traded companies.
The Federal Accounting Standards Advisory Board (FASAB)
The Federal Accounting Standards Advisory Board is responsible for developing GAAP principles for federal financial reporting entities. FASAB's mission is to consider the financial and budgetary information needs for federal entities and develop accounting standards. GAAP principles also allow investors to access financial information of publicly traded companies.
Accounting is the systematic recording and analysis of financial transactions. Accounting methods are used to economic cash flows but, not to effect change in cash flows. Accounting is the process of gathering and communicating financial information. Information is in the form of financial statement. These statements describe the terms of the economic resources under management. Accounting involves bookkeeping and and auditing. Modern accounting authorities use a standard set of rules for reporting financial information. Modern accounting standards refer to as the Generally Accepted Accounting Principles.
The Result of Modern Accounting Standard
As a result of modern accounting standards both public and private entities can provide interested parties with consistent and reliable financial information. The modern accounting system also provides assurance that governmental entities are conducting activities economically and in compliance with regulatory guidelines.