Generally Accepted Accounting Principles in 2024 [Updated]

Generally accepted accounting principles (GAAP) are defined as the rules of action or conduct which are derived from experience and practice; which when prove useful become accepted as principles of accounting. They are used to maintain consistency and uniformity in accounting records throughout the country. These principles are often called by various names such as postulates, assumptions, concepts and conventions etc. The general acceptability of these principles depend of how well they satisfy the criteria of Relevance i.e. they should be relevant to the extent that it result in the information which is useful and meaning for the end user of accounting information, Objectivity i.e. they are not influenced by the personal bias and judgement of the person providing accounting information and Feasibility i.e. they can be implemented without large cost of complexities.

There are certain basic assumptions and underlying principles on which GAAP are based. Some of these areCost Benefit Principle i.e. cost of applying a principle should not be more than benefit derived from it, Materiality Principle i.e. all material information should be recorded and unimportant information is left out while making decisions, Consistency Principles i.e. rules and principles used to record transactions should remain consistent so that they remain comparable, Prudence or Conservatism Principle i.e. all potential losses should be recorded while all prospective gains should be left out.
In India, Accounting Standards (AS) are issued byAccounting Standard Board (ASF) constituted by Institute of Chartered Accountants of India (ICAI) to maintain uniformity in maintaining financial records. Accounting Standards act as both guideline and yardstick for measurement. As a general rule, they are applicable to all corporate entities. According to ICAI as on 1^st September, 2014 there are 28 mandatory AS and 3 non-mandatory AS. These are as follows:

Mandatory AS:-
AS-1 deals with disclosure of accounting policies
AS-2 deals with valuation of Inventories
AS-3 deals with cash flow statement
AS-4 deals with contingencies and events occurring after the Balance Sheet date
AS-5 deals with net profit or loss for the period, prior period (period before the date of balance sheet) items and changes in accounting policies
AS-6 deals with depreciation Accounting
AS-7 deals with accounting for construction contracts
AS-9 deals with revenue Recognition
AS-10 deals with accounting for fixed assets
AS-11 deals with accounting for the effects of change in foreign exchange Rates.
AS-12 deals with accounting for Government grants
AS-13 deals with accounting for investments
AS-14 deals with accounting for amalgamation
AS-15 deals with accounting for retirement Benefits in the financial statements of employers
AS-17 deals with segment reporting
AS-18 deals with related party disclosures
AS-19 deals with leases
AS-20 deals with earning per share
AS-21 deals with consolidated financial statements
AS-22 deals with accounting for taxes on Income
AS-23 deals with accounting for investments in Associates in consolidated financialstatements
AS-24 deals with discontinued operations
AS-25 deals with interim financial reporting
AS-26 deals with intangible Assets
AS-27 deals with financial reporting of interest for joint venture
AS-28 deals with impairment of assets
AS-29 deals with provision for contingent labilities and contingent assets

Non Mandatory AS:-
AS-30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2, AS 11 (revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29
AS-31 Financial Instruments: Presentation
AS-32 Financial Instruments: Disclosures, and limited revision to Accounting Standard (AS) 19, Leases

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GAAP is used primarily by businesses reporting their financial results in the United States. International Financial Reporting Standards, or IFRS, is the accounting framework used in most other countries

GAAP provides standards for recording recognizable transactions and pertinent information that users of financial statements need to make effective decisions. … GAAP clarifies and narrows down the information needed to make financial reporting as accurate and relevant as possible.

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