What does GAAP mean? If you’re a small business owner, you probably haven’t had time to concern yourself with some of the more arcane subjects in the world of accounting. If you’re a bookkeeper or accountant, you’ll be familiar with GAAP and know that it means Generally Accepted Accounting Principles.
Generally Accepted Accounting Principles (GAAP) is basically a common set of accounting standards that companies use to run their accounting and finances. It is a standard designed to ensure consistency and reliability of financial reporting for investment purposes. All accountants and CPAs will be very knowledgeable about GAAP but you should know a few things for yourself as well.
Key Principles of GAAP
Accounting Entity: The business, revenue, and costs are separate from the owners and operators of the business. All business finances should be kept separate from owners.
Going Concern: This assumes the business will continue into the foreseeable future, validating methods of depreciation.
Monetary Unit: Basically this just means a stable and reliable currency will be the unit of record, not an issue in the US or Euro Area.
