Intermediate Accounting

Intermediate Accounting

The following answers are related to the accounting standards designed by the International authorities which all the entities either public sector or private sector need to follow in order to represent the financial information through the financial statements. The accounting standards discussed below is GAAP, IASB and FASB. All these standards have one common aim that is to provide accurate and transparent information to the investors and other stakeholders.

Question 1

According to rules and regulations of running a business entity it is important to perform the reporting activity. The business entities need to hire individuals, accountants who are aware of the reporting and accounting standards. Like for any action to perform there are certain rules and regulations or criteria's set to perform that action, similarly there are certain rules and regulations designed by the authorities which need to be followed in order to ensure that the correct financial reporting activity performed by all the organization in the country.

Generally Accepted Accounting Principles (GAAP) is one of the accounting standards which the firms operating in United States of America need to follow. In this world nobody is perfect so in order to overcome the weaknesses in reporting of the financial information of an organization there are Generally accepted Accounting Principles according to which every organization has an obligation to disclose all the relevant information to all the stakeholders, especially investors.

An owner of the organization feels insecure to disclose all the information to the public because its competitors can make use of that information and can gain advantage over one another. Thus GAAP is designed which enables the organization to only disclose the financial information that is necessary for the investors to make their decisions and ensures that the information provided is true and transparent. Thus it is morally incorrect to take money for providing extra information because risk is there that the information is sold to competitors and etc. It is important for all the members of the society to follow the rules and regulations. Therefore it is better for the organizations to provide financial information that is necessary for the investors under the GAAP so that correct and transparent information is communicated regarding the organization's performance.

Question 2

In order to ensure that all the financial information is clean from any influence either from the owner or any other party to portray a wrong picture of the organization, there is an independent ...