This course focuses on the GAAP principles for proper preparation of financial statements. We highlight the concepts in ASC 205 regarding presentation of those financial statements.
Generally accepted accounting principles (GAAP) are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.
Compliance with these GAAP principles is built on three rules that aim to eliminate misleading accounting and financial reporting practices. These rules create consistent accounting and reporting standards which provide prospective and existing investors with reliable methods of evaluating an organization’s financial standing. They include:
- The basic accounting principles, assumptions and considerations.
- Assumptions are considered a statement that is presumed to be true without concrete evidence to support it.
- Considerations are areas that govern the accountant’s ability to make decisions.
- Principles are the rules and guidelines that companies must follow when reporting financial data. These principles include: cost, disclosure, going concern, matching, revenue recognition, professional judgment, and conservatism
- Rules and standards issued by the FASB and its predecessor, the Accounting Principles Board (APB)
- Generally accepted industry practices
Per GAAP, companies are responsible for providing reports on their cash flows, profit-making operations and overall financial conditions. There are three major financial statements required under GAAP:
- Income statement
- Balance sheet
- Cash flow statement
Presentation of the Financial Statements in accordance with GAAP is governed by Accounting Standards Codification (ASC) Topic 205, Presentation of Financial Statements. The Standard defines the following as a full set of financial statements:
- Financial position at the end of the period
- Earnings, which may be shown in a separate statement or within one continuous statement of comprehensive income
- Comprehensive income for the period in one statement or two consecutive statements
- Cash flows during the period
- Investments by and distributions to the owners during the period.
Note: This course is also a part of The Controllership Series.
Note: Information within this course comes from readily available public domain documents and is utilized by the trainer as a supplement for relaying the course content.
Learning Objectives
- Explore the history of generally accepted accounting principles (GAAP) and recognize why the accounting and GAAP principles are of strategic importance to the accounting profession.
- Discover the GAAP assumptions, principles and considerations and their application.
- Discover the GAAP rules and standards.
- Discover how to apply GAAP principles, assumptions, and considerations to the financial statements.
Included In Certifications
This course is included in the following Certification Programs:
14 CoursesProfessional Bookkeeping Certification
18 CoursesFinancial Statement Preparation, Reporting and Auditing Certification
180 Reviews (882 ratings)
Prerequisites
No advanced preparation or prerequisites are required for this course.
Education Provider Information
Course Questions and Answers(4 Questions)

The last question on the Final Exam is about information that was not covered in the course. The question reads: "Which of the following are NOT considered elements of other comprehensive income?" I knew the answer from Intermediate Accounting I, but this could be frustrating for others.
Also, the question on the Final Exam: "How is the concept of going concern related to the income statement? gives as a correct answer information that is not stated in the material. I will admit when you think about it, I understand why it is the correct answer.
Perhaps these were questions that caused the reviewer [Anonymous (Accountant)] to feel that "the exam questions were very deceiving."
Thanks for your comments. I always take the questions from the material or terms. I will relook at these to see if there is an issue. Thanks for you input
I found the problem and thank you again for pointing it out. Illumeo inadvertently used the final exam questions from the GAAP Financial statement course on this course. I will have them correct it. This should have been caught in their quality review.
Enjoyed class. I especially liked the easy-to-follow examples.