From the course: Accounting Foundations: Understanding the GAAP (Generally Accepted Accounting Principles)

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Overview of the basics

Overview of the basics

From the course: Accounting Foundations: Understanding the GAAP (Generally Accepted Accounting Principles)

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Overview of the basics

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- Do you like to play games, or have you ever bought property? Whether we are playing a game, making a purchase, driving a car, or completing a university degree, we find ourselves living with rules and rulebooks. All rules around us are driven by some basic principles, like lawfulness and fairness. The field of accounting is no different. There are some core principles that guide the framework used to create the rules of accounting. Let's take a look. Really, this is just a glance at these core principles. For the most part, entities applying US GAAP must use accrual-basis accounting. This simply means that transactions are recorded when they occur even if no cash has been exchanged. Most of us use cash-basis accounting in our everyday lives, and accrual basis can feel a bit strange at first because we function in a cash world. The revenue recognition principle states that we can only show revenue once the performance…

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