What are some GAAP rules on financial records?


Quick Answer

Generally Accepted Accounting Principles, or GAAP, mandate that accounting records only feature business activities that accountants can express in dollar sums, says Study.com. GAAP rules also require that all financial statements report business activities in distinct time periods. Whether these periods are weeks or whole fiscal years, financial records must feature clearly defined intervals.

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Full Answer

GAAP rules require financial records to follow the matching principle, reports Study.com. This principle insists that records match business income and related operating expenses. For example, the accountant should record any sales-related expense in the same financial period during which related sales income is reported.

When an item’s cost is reported on a financial statement, GAAP rules require that records list the actual historical cost of the item, not its inflation-adjusted cost, says Study.com. GAAP rules promulgate the full disclosure principle, which says that businesses must report data related to business operations, either in financial statements or related notes.

GAAP rules were developed in the wake of the Stock Market Crash of 1929, which lead to the Great Depression, according to Study.com. The rules were developed by the American Institute of Accountants at the urging of the Securities and Exchange Commission, or SEC. These rules were designed to restore public confidence in securities and investments in general.

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