Part I.
A. Generally Accepted Accounting Principles. GAAP is not a fixed set of rules. It is a guideline or more precisely a group of objectives and concepts that have evolved over 500 years from the basic concepts of Luca Pacioli set forth in the 1400s. It governs how financial statements are prepared and presented in the United States. The Financial Accounting Standards Boards (FASB), the American Institute of Certified Public Accountants and the Securities and Exchange Commission (SEC) provide guidance about acceptable accounting practices. Some of the reasons we use GAAP are that any business that expects anyone from outside their company to look at their financial data needs to use GAAP. Compliance with GAAP helps maintain …show more content…

Measurable costs means that the item must have been acquired or purchased like trademarks instead of self developed reputation. The definition of current assets is that it has to be cash and assets expected to become cash or used up soon, usually within one year. The following are examples of current assets; cash, securities, marketable securities, accounts receivable, notes receivable, inventory and prepaid items. The definition of non-current assets is they are assets that are expected to be useful for more than a year and are broken into tangible and intangible assets. Tangible assets consist of assets with physical substance, property, plant and equipment and accumulated depreciation. Intangible assets are other non-current assets, without physical substance or investments. Types of intangible assets are patents and trademarks along with goodwill. Goodwill can be created when one company buys another company out in excess of the value of its assets. Liabilities are amounts owed a creditor, source of assets, and claims on assets. Current liabilities are claims due soon, usually within a year. Some examples of current liabilities are amounts owed by the entity to its suppliers or the opposite of accounts receivable. An example could be a 60 day credit. More examples of current liabilities are bank loan payables, accrued liabilities, estimated tax liability, and long-term debt. Noncurrent liabilities include the