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Generally Accepted Accounting Principles (GAAP)

2011-03-29T10:20:00.000-07:00

Generally Accepted Accounting Principles (GAAP) is the standard framework of guidelines for financial accounting. It includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements.
One key aspect of GAAP is an emphasis on the term "general", since not all accounting exercises employ the same method and generate the same results. GAAP accommodates variation in applied accounting methods as long as the methods generally adhere to its set of broadly-defined principles.
GAAP also creates an environment in which financial reporting results can vary depending on purpose. One company may produce different reports for the same fiscal year, all completed within GAAP, for different audiences or different purposes, and all of these reports can be considered correct.
A company may report financial performance considered acceptable by the accounting firm producing the review, yet upon closer investigation, irregularities may be revealed. This may require a restatement of all or part of the report. Recently (2006 - 2007), well known corporations such as Apple and Research In Motion had to restate parts of their financial reports in which adherence to certain "best practices" was questionable.

Financial accounting information must be assembled and reported objectively. Third-parties who must rely on such information have a right to be assured that the data are free from bias and inconsistency, whether deliberate or not. For this reason, financial accounting relies on certain standards or guides that are called "Generally Accepted Accounting Principles" (GAAP).
Principles derive from tradition, such as the concept of matching. In any report of financial statements (audit, compilation, review, etc.), the preparer/auditor must indicate to the reader whether or not the information contained within the statements complies with GAAP.

Principle of regularity: Regularity can be defined as conformity to enforced rules and laws. This principle is also known as the Principle of Consistency.

Principle of sincerity: According to this principle, the accounting unit should reflect in good faith the reality of the company's financial status.

Principle of the permanence of methods: This principle aims at allowing the coherence and comparison of the financial information published by the company.

Principle of non-compensation: One should show the full details of the financial information and not seek to compensate a debt with an asset, a revenue with an expense, etc.

Principle of prudence: This principle aims at showing the reality "as is" : one should not try to make things look prettier than they are. Typically, a revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable.

Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle mitigates the principle of prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value (see depreciation).

Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription (or lease, etc.), the given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction.

To achieve basic objectives and implement fundamental qualities GAAP has four basic assumptions, four basic principles, and four basic constraints.

Assumptions

Business Entity: assumes that the business is separate from its owners or other businesses. Revenues and expenses should be kept separate from personal expenses.
Going Concern: assumes that the business will be in operation indefinitely. This validates the methods of asset capitalization, depreciation, and amortization. Only when liquidation is certain this assumption is not applicable.
Monetary Unit principle: assumes a stable currency is going to be the unit of record. The FASB accepts the nominal value of the US Dollar as the monetary unit of record unadjusted for inflation.
The Time-period principle implies that the economic activities of an enterprise can be divided into artificial time periods.

Principles

Cost principle requires companies to account and report based on acquisition costs rather than fair market value for most assets and liabilities. This principle provides information that is reliable (removing opportunity to provide subjective and potentially biased market values), but not very relevant. Thus there is a trend to use fair values. Most debts and securities are now reported at market values.
Revenue principle requires companies to record when revenue is (1) realized or realizable and (2) earned, not when cash is received. This way of accounting is called accrual basis accounting.
Matching principle. Expenses have to be matched with revenues as long as it is reasonable to do so. Expenses are recognized not when the work is performed, or when a product is produced, but when the work or the product actually makes its contribution to revenue. Only if no connection with revenue can be established, may cost be charged as expenses to the current period (e.g. office salaries and other administrative expenses). This principle allows greater evaluation of actual profitability and performance (shows how much was spent to earn revenue). Depreciation and Cost of Goods Sold are good examples of application of this principle.
Disclosure principle. Amount and kinds of information disclosed should be decided based on trade-off analysis as a larger amount of information costs more to prepare and use. Information disclosed should be enough to make a judgment while keeping costs reasonable. Information is presented in the main body of financial statements, in the notes or as supplementary information

Constraints

Objectivity principle: the company financial statements provided by the accountants should base on objective evidence
Materiality principle: the significance of an item should be considered when it is reported. An item is considered significant when it would affect the decision of a reasonable individual.
Consistency principle: accounting procedures should follow industry practices.

Prudent principle: when choosing between two solutions, the one that will be least likely to overstate assets and income should be picked.

the law of diminishing marginal utility

2011-03-23T08:51:00.000-07:00

Total utility refers to the total satisfaction derived from a good. The rational consumer is a utility maximiser and as he consume more of a good the marginal utility derived (extra Satisfaction) decreases. This is the law of diminishing marginal utility.

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What is utility?

2011-03-23T08:48:00.000-07:00

In economics, utility is a measure of the relative satisfaction from, or desirability of, consumption of various goods and services. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility. For illustrative purposes, changes in utility are sometimes expressed in units called utils.

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Bangladesh official statistics

2011-03-13T23:51:00.001-07:00

more about bangladesh official statistics...........................

Differentiate between centralization & decentralization.

2011-01-30T07:07:00.001-08:00

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the steps in an organizing process

2011-01-30T06:56:00.001-08:00

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the principles of organization

2011-01-30T06:52:00.000-08:00

see on the page p-of-marketing

organizing and organization.

2011-01-30T06:51:00.000-08:00

Basically, an organization in its simplest form (and not necessarily a legal entity, e.g., corporation or LLC) is a person or group of people intentionally organized to accomplish an overall, common goal or set of goals. Business organizations can range in size from one person to tens of thousands.

information aid: information aid: IT & Computer

2010-09-06T19:34:00.001-07:00

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information aid: IT & Computer

2010-09-06T19:34:00.000-07:00

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2010-09-06T19:27:00.000-07:00

Featuring two Radeon HD 5870 chipsets clocked at 850 MHz, this Asus ARES graphics card wipes out the competition by offering performances that are up to 32% better than those of the Radeon HD 5970. You'll be able to enjoy the latest video games with never-before-seen frame rates!

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information aid: Company act 1994

2010-09-06T11:41:00.000-07:00

information aid: Company act 1994: "The Companies Act (Bangladesh), 1994 (See section 404) (Published by Notification No. SRO 177-law dated 1-10-95. of Ministry of Commerce) Ac..."

Bangladesh Professional: VAT

2010-09-05T10:10:00.000-07:00

Bangladesh Professional: VAT: "Value Added Tax (i) VAT is imposed on goods and services at import stage, manufacturing, wholesale and retails levels; (ii) A unifo..."

Bangladesh Professional: Taxation

2010-09-05T10:09:00.002-07:00

Bangladesh Professional: Taxation: "Tax Rate (Assessment Year- 2008-09) : Other than Company : For individuals other than female taxpayers, senior taxpayers of 70 years and ab..."

Bangladesh Professional: Information

2010-09-05T10:09:00.001-07:00

Bangladesh Professional: Information: "Tips for jobseekers: • Search jobs online, ask friends & relatives • Check the requirement on advertisement • Change the CV as it required ..."

Bangladesh Professional: Education

2010-09-05T10:09:00.000-07:00

Bangladesh Professional: Education: "A standard job application format: Date: Personnel Manager ...................... .................... Subject: Application for ..........."

Business combination

2010-09-05T09:33:00.001-07:00

information aid: discuss about Cartel, Holding company, Trust

information aid: Factory act

2010-09-05T09:28:00.000-07:00

information aid: Factory act: "Bangladesh Factories Act, 1965 (No. 4 of 1965). CHAPTER I.- PRELIMINARY Section 1. Short title, extent and commencement. - (1) This Act m..."

information aid: Factory act

2010-09-05T09:18:00.000-07:00

information aid: Factory act: "Bangladesh Factories Act, 1965 (No. 4 of 1965). CHAPTER I.- PRELIMINARY Section 1. Short title, extent and commencement. - (1) This Act m..."

information aid: Business & associates

2010-09-05T09:11:00.000-07:00

information aid: Business & associates: "What is economic system? Explain various typesof economic system. Organized way in which a state or nation allocates its resources and ap..."

What is economic system? Explain various typesof economic system.

2010-09-05T09:09:00.000-07:00

Organized way in which a state or nation allocates its resources and apportions goods and services in the national community. Economic system appears in the definitions of the following terms: mixed economy, capitalism, metaproblem, laissez-faire economics, automatic fiscal stabilizers, economic dynamics, macroeconomics, business, success to the successful, international business

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Paradox of value

2010-09-03T03:44:00.000-07:00

This phrase was first used by Scots economist Adam Smith (1723-1790). In his theory he wonders how a diamond can be so tremendously valuable, but have no inherent worth i.e. it is not necessary to life, whilst water which is central to living is practically worthless.

He recognised that it was possible that this was the case because water is plentiful but diamonds are not, but this would not account for the price of the commodity not the value. Yet we would all value a diamond more than a jug of water.

He concluded that the difference in value was caused by the fact that diamonds are labour intensive in the sense that they have to be extracted cut, shaped and polished, whereas water can be esaily obtained by anyone. This means that water may have a greater use value than diamonds, but it has a much lower exchange value and this was his paradox of value!

The paradox of value addresses why absolute necessities such as water are valued (priced) so cheaply, while frivolities like diamonds are highly valued and command outrageous prices.

The paradox of value refers to the fact that very useful goods (e.g., water) can have very low prices, whereas goods that are not necessary for survival (e.g., diamonds) can command high prices.

Bangladesh Factories Act, 1965

2010-09-03T03:17:00.001-07:00

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THE EMPLOYMENT OF LABOUR (STANDING ORDERS) ACT, 1965

2010-09-03T02:51:00.000-07:00

BANGLADESH
THE EMPLOYMENT OF LABOUR (STANDING ORDERS) ACT, 1965
Act VIII of 1965
________________________________________
An Act to repeal and with certain amendments, re-enact the Industrial and Commercial Employment (Standing Orders) Ordinance, 1960.

WHEREAS it is expedient to repeal and, with certain amendments, re-enact the Industrial and Commercial Employment (Standing Orders) Ordinance, 1960 (Ordinance No. III of 1960) for regulating conditions of service of workers employed in Shops and Commercial and Industrial Establishments and for matters connected therein;

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What is monetary policy? What are the principle objectives of the monetary policy?

2010-09-03T01:29:00.000-07:00

Monetary policy is the attitude of the political authority towards the monetary system of the community under its control. It is the process a government, central bank, or monetary authority of a country uses to control (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest to attain a set of objectives oriented towards the growth and stability of the economy. Monetary policy is one of the tools that a national Government uses to influence its economy. Using its monetary authority to control the supply and availability of money, a government attempts to influence the overall level of economic activity in line with its political objectives. Monetary policy is referred to as either being an expansionary policy, where an expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply.

Objectives of monetary policy:

To save guard the country’s gold reserve: The gold standard is a better monetary system. The far right advocates the gold standard because it gets government out of the business of controlling the money supply. They fear that printing money creates inflation, and retracting money causes recessions.

To maintain price stability: The benefits of price stability are substantial. Maintaining stable prices on a sustained basis is a crucial pre-condition for increasing economic welfare and the growth potential of an economy

To maintain exchange stability: It shows that fixing the exchange rate to a basket of currencies instead of a single currency serves to promote long-term stability to which the Bank remains strongly committed. A stable exchange rate imposes a constraint on domestic monetary policy which could be regarded as a useful safeguard against unsound policies.

Elimination of cyclical fluctuation: In recent years the problems of monetary policy have been approached more and more with a view to both stabilizing the value of the monetary unit and eliminating fluctuations in the economy. To attempt at explaining and publicizing these most difficult economic problems. It may perhaps be appropriate to speak of fashions in economics.

Achievement of full employment: Needlessly high levels of unemployment are a contributing factor to a wide range of social ills, which would be substantially alleviated by driving unemployment. This will require substantial increases in government deficits and debt.

Acceleration of economic growth: Expansionary monetary policy is monetary policy that seeks to increase the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry. There is no clear consensus on how monetary policy affects real economic variables. Both economic schools accept that monetary policy affects monetary variables