Why Your Business Need GAAP Support

As par Financial Regulations, it is mandatory that companies are to submit Financial Statements for a particular Financial Year to the Authority. There are certain accounting standard and principles, which the companies must follow as guideline while preparing the Financial Statement. GAAP or generally accepted accounting principles is the authoritative accounting standards and accepted ways set by policy boards that provide guidelines to the companies to prepare the financial statement.

 

GAAP guidelines provide the companies to prepare the financial statement in a convenient and flawless way so that it is acceptable to the Financial Authority. This standard provides transparency of the communication of financial information and serves multiple purposes in favor of the company.

GAAP provides ways and means to ensure the companies to maintain a minimum level of consistency in their financial statement. This makes the easier way for the investors to analyze and capture the useful financial information of the company. GAAP also advantageous way to cross-comparison of financial status amongst the different companies.

When the company presents its financial statements to outsider’s GAAP must be observed. In the events of public trading share by the company, the financial statement must follow the rules framed by U.S. Securities and Exchange Commission (SEC) strictly.

GAAP Applications covers an elaborated area as stated below:

Revenue recognition: The sub-clause under of GAAP provides specific condition under which revenue is accounted for 

Balance sheet: A summarized financial statement under GAAP that describes its financial assets, liabilities, and shareholders' equity at a particular event.

Financial Statements: A financial statement is another sub-clause of GAAP related to the businesses usually includes income statements, balance sheets, retained earnings statements, as well as cash flows. It is compulsory for a business house to present financial statements to maintain the flow of information and its presentation across international neighbors.

Income Statement: It is another important clause under GAAP. The income statement covers a wide range of time, in the year for submission of annual financial statements and a quarter for quarterly financial statements. This statement provides an overview of revenues, expenses, net income, and earnings per share. It usually needs two to three years financial data for comparison.

Cash Flow Statement: The cash flow statement correlates the balance sheet statement and the income statement. According to a conventional reason of accounting, net income can distract of alignment with cash flow. This statement maintains satisfactory relations of the income statement with the balance sheet in three major business areas. These activities comprise operating, investing and financing activities. 

Operating activities include cash flows realized from regular business operations. Investing activities covers cash flows due to the buying and selling of assets. Financing activities take care of cash flows from debt and equity. In order to protect your accounting system from cyber attacks, think of using building access control systems, which has become highly popular in industry.  

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