GAAP Principles

Question 1

Principle of Regularity

Answer 1

Accountants must follow all GAAP rules and regulations.

Question 2

Principle of Consistency

Answer 2

Accountants and businesses should be consistent in their accounting process from period to period.

Question 3

Principle of Sincerity

Answer 3

Accountants should strive for accuracy and impartiality in their work.

Question 4

Principle of Permanence of Methods

Answer 4

The methods used in financial reporting must be consistent to allow for comparison of the company’s financial information.

Question 5

Principle of Non-Compensation

Answer 5

Businesses may not compensate for debt with revenues or other accounts

Question 6

Principle of Prudence

Answer 6

Companies must report fact-based financial data without speculation.

Question 7

Principle of Continuity

Answer 7

Accountants must assess and report data assuming business continuity.

Question 8

Principle of Periodicity

Answer 8

All entries must be recorded accurately according to the time they occurred.

Question 9

Principle of Materiality (or Good Faith)

Answer 9

Accountants must fully disclose all financial data in financial reports.

Question 10

Principle of Materiality (or Good Faith)

Answer 10

All parties must remain honest in all transactions.