Description

NOTE: This is an introductory level course on accounting principle and internal controls. It is targeted for professionals just entering the profession, individuals who may be bookkeepers for their organizations or even management individuals who have not been formally schooled in the concepts of accounting.

The early development of accounting dates back to ancient Mesopotamia. It is related to developments in writing, counting and money and early auditing systems as developed by the ancient Egyptians and Babylonians. By the time of the Roman Empire, the government had access to detailed financial information.

In today’s business world, almost all professions must have a basic understanding of accounting concepts and principles. This is critical to running an effective and efficient organization. Absent standards, companies would be free to present financial information in whatever format best suits their needs.

Generally accepted accounting principles are a set of rules that encompass the details, complexities and legalities of business and corporate accounting. The Financial Accounting Standards Board uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices. GAAP is not static. It includes complex standards issued in response to very complicated business transactions. Often these practices are a response to changes in government regulations of industry.

Compliance with GAAP principles is built on three rules that aim to eliminate misleading accounting and financial reporting practices. These parts of GAAP include:

• Basic Accounting Principles and guidelines
• Generally Accepted Industry Practices
• Rules and Standards Issued by FASB and its predecessor the Accounting Principles Board

These rules create consistent accounting and reporting standards which provide prospective and existing investors with reliable methods of evaluating an organization’s financial standing.

All professions have their own “unique language”. Accounting is no different. Prior to delving into concepts like accounting principles, considerations, GAAP; it is important to first understand and define some important accounting terms. We will begin with terms that are crucial to understanding the meaning behind accounting principles and concepts and then move further into the concepts related to the financial statements and internal control.