100 GAAPs Every Bookkeeper or Accountant Must Know

Understanding the key principles of GAAP (Generally Accepted Accounting Principles) is essential for any bookkeeper or accountant. These principles ensure that financial statements are accurate, consistent, and in compliance with regulatory standards. Below is a list of 100 essential GAAPs that every accounting professional should be familiar with.

1. Accrual Basis Accounting

?? - Revenues and expenses are recorded when they are earned or incurred, not when cash is received or paid.

2. Revenue Recognition Principle

?? - Revenue is recognized when it is earned, regardless of when payment is received.

3. Matching Principle

?? - Expenses should be matched with the revenues they help generate within the same period.

4. Materiality

?? - Only information that would influence the decision of a reasonable person needs to be included in financial statements.

5. Consistency Principle

?? - The same accounting methods should be applied from one period to the next, unless a change is justified.

6. Conservatism

?? - When in doubt, report the least optimistic estimate for revenues and the most conservative estimate for expenses.

7. Full Disclosure Principle

?? - All information that could affect the understanding of financial statements must be disclosed.

8. Going Concern Principle

?? - Assumes that a company will continue to operate for the foreseeable future.

9. Cost Principle

?? - Assets are recorded at their original cost, not at their current market value.

10. Economic Entity Assumption

?? - The business is treated as separate from its owners or other businesses.

11. Time Period Assumption

?? - Financial reporting is done for specific time periods, such as monthly, quarterly, or annually.

12. Monetary Unit Assumption

?? - Only transactions that can be expressed in monetary terms are recorded.

13. Reliability

?? - Financial statements should be based on objective evidence that can be verified.

14. Prudence

?? - Financial statements should not overstate assets or income.

15. Industry Practices

?? - Certain industries follow specific accounting practices that may deviate from GAAP but are accepted within that industry.

16. Historical Cost Principle

?? - Assets are recorded based on their original purchase price.

17. Fair Value Principle

?? - Some assets and liabilities are reported at their fair value, not historical cost.

18. Revenue Principle

?? - Revenue is recognized when it is realized or realizable and earned.

19. Expense Recognition Principle

?? - Expenses are recognized when they are incurred, not necessarily when they are paid.

20. Recognition of Liabilities

?? - Liabilities are recognized when the obligation to pay is incurred.

21. Disclosure of Accounting Policies

?? - Companies must disclose the accounting methods used in financial reporting.

22. Segment Reporting

?? - Financial information should be reported by segments, such as divisions or product lines.

23. Income Statement

?? - Should reflect the company's performance over a specific period, showing revenues, expenses, and profits.

24. Balance Sheet

?? - Provides a snapshot of a company’s financial position at a specific point in time.

25. Statement of Cash Flows

?? - Shows how cash is generated and used over a period, classified into operating, investing, and financing activities.

26. Equity

?? - Represents the ownership interest in the company, calculated as assets minus liabilities.

27. Depreciation

?? - The allocation of the cost of a tangible asset over its useful life.

28. Amortization

?? - The allocation of the cost of an intangible asset over its useful life.

29. Impairment of Assets

?? - An asset is impaired if its carrying amount exceeds its recoverable amount.

30. Inventory Valuation

?? - Methods include FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted average.

31. Allowance for Doubtful Accounts

?? - An estimate of the amount of accounts receivable that will not be collected.

32. Accrued Expenses

?? - Expenses that have been incurred but not yet paid.

33. Deferred Revenue

?? - Revenue that has been received but not yet earned.

34. Prepaid Expenses

?? - Payments made in advance for goods or services to be received in the future.

35. Contingent Liabilities

?? - Potential liabilities that depend on the outcome of future events.

36. Leases

?? - Accounting for leases as either operating or finance leases.

37. Pension Accounting

?? - Accounting for employer-sponsored pension plans.

38. Stock Options

?? - Accounting for employee stock option plans.

39. Share-Based Payments

?? - Recognition of compensation expenses related to equity instruments granted to employees.

40. Diluted Earnings Per Share (EPS)

?? - Calculated by adjusting the number of shares for potential shares from convertible securities.

41. Income Taxes

?? - Accounting for income taxes, including deferred tax assets and liabilities.

42. Foreign Currency Transactions

?? - Accounting for transactions in a currency other than the company's functional currency.

43. Translation of Foreign Operations

?? - Translating financial statements of foreign subsidiaries into the parent company's currency.

44. Goodwill

?? - Accounting for the excess of purchase price over the fair value of identifiable assets and liabilities in a business combination.

45. Business Combinations

?? - Accounting for mergers and acquisitions, including purchase price allocation.

46. Non-controlling Interest

?? - The portion of equity in a subsidiary not attributable to the parent company.

47. Segment Reporting

?? - Reporting financial information for different business segments within a company.

48. Research and Development Costs

?? - Accounting for the costs associated with research and development activities.

49. Advertising Costs

?? - Expensing advertising costs as they are incurred.

50. Warranty Costs

?? - Accounting for the estimated costs of product warranties.

51. Revenue from Contracts with Customers

?? - Accounting for revenue based on a five-step model.

52. Construction Contracts

?? - Accounting for long-term contracts, including the percentage-of-completion method.

53. Customer Loyalty Programs

?? - Accounting for the cost of loyalty points awarded to customers.

54. Interest Costs

?? - Capitalizing interest costs associated with the construction of assets.

55. Debt Covenants

?? - Accounting for the impact of debt covenants on financial reporting.

56. Convertible Debt

?? - Accounting for debt that can be converted into equity.

57. Nonmonetary Transactions

?? - Accounting for exchanges of assets or services without monetary consideration.

58. Derivatives and Hedging

?? - Accounting for financial derivatives and hedging activities.

59. Fair Value Measurements

?? - Hierarchy of inputs used to measure fair value.

60. Impairment of Goodwill

?? - Testing goodwill for impairment on an annual basis.

61. Equity Method of Accounting

?? - Accounting for investments in associates using the equity method.

62. Investment in Marketable Securities

?? - Accounting for investments in equity and debt securities.

63. Consolidation

?? - Accounting for subsidiaries in the parent company's financial statements.

64. Joint Ventures

?? - Accounting for joint ventures, including the proportionate consolidation method.

65. Income Recognition for Installment Sales

?? - Recognizing revenue as payments are received in installment sales.

66. Franchise Accounting

?? - Accounting for franchise agreements.

67. Intangible Assets

?? - Recognition and amortization of intangible assets.

68. Patents and Trademarks

?? - Accounting for the cost of acquiring and defending patents and trademarks.

69. Computer Software Costs

?? - Accounting for the costs of developing or acquiring software.

70. Licensing Arrangements

?? - Accounting for revenue and expenses related to licensing agreements.

71. Environmental Liabilities

?? - Accounting for liabilities related to environmental cleanup.

72. Litigation Settlements

?? - Accounting for settlements of lawsuits and legal disputes.

73. Insurance Claims

?? - Accounting for insurance claims and recoveries.

74. Government Grants

?? - Accounting for grants received from government entities.

75. Deferred Compensation

?? - Accounting for compensation earned in one period but paid in a future period.

76. Employee Benefits

?? - Accounting for benefits provided to employees, such as healthcare and retirement plans.

77. Termination Benefits

?? - Accounting for costs associated with employee terminations.

78. Shareholder Dividends

?? - Accounting for the declaration and payment of dividends to shareholders.

79. Stock Repurchases

?? - Accounting for the buyback of a company's own shares.

80. Treasury Stock

?? - Accounting for shares repurchased and held by the company.

81. Earnings Per Share (EPS)

?? - Calculating basic and diluted earnings per share.

82. Revenue from Multiple Deliverables

?? - Accounting for revenue from contracts with multiple components.

83. Discontinued Operations

?? - Accounting for the disposal of a business segment

84. Extraordinary Items

?? - Accounting for unusual and infrequent events.

85. Subsequent Events

?? - Accounting for events occurring after the balance sheet date but before financial statements are issued.

86. Loss Contingencies

?? - Accounting for potential losses that may arise from future events.

87. Asset Retirement Obligations

?? - Accounting for the cost of retiring a long-lived asset.

88. Leasing

?? - Differentiating between operating and finance leases.

89. Investment Property

?? - Accounting for property held for rental income or capital appreciation.

90. Biological Assets

?? - Accounting for living plants and animals.

91. Revenue Sharing Arrangements

?? - Accounting for revenue sharing agreements between entities.

92. Agent vs. Principal

?? - Determining whether a company is acting as an agent or principal in a transaction.

93. Volume Discounts

?? - Accounting for discounts given to customers based on purchase volume.

94. Rebates

?? - Accounting for rebates given to customers after the sale.

95. Vendor Allowances

?? - Accounting for allowances received from vendors.

96. Rebates Payable

?? - Accounting for rebates owed to customers.

97. Provisions for Liabilities

?? - Accounting for future obligations that are uncertain in timing or amount.

98. Restructuring Costs

?? - Accounting for costs associated with reorganizing a company.

99. Equity-Based Compensation

?? - Accounting for compensation in the form of equity.

100. Accounting Changes

?? - Handling changes in accounting principles, estimates, and reporting entities.

These 100 principles form the bedrock of financial accounting and reporting. Mastering them ensures accuracy, consistency, and compliance in financial statements. For any accountant or bookkeeper, a solid understanding of these GAAPs is not just beneficial—it’s essential.