About GAAP

For other expenses and for sales revenue, one general accounting method has been established; there are no alternative methods. One business applies the accounting methods in a conservative manner, and another business applies the methods in a more liberal manner.

For other expenses and for sales revenue, one general accounting method has been established; there are no alternative methods. One business applies the accounting methods in a conservative manner, and another business applies the methods in a more liberal manner.

For one thing, GAAP themselves permit alternative accounting methods to be used for certain expenses and for revenue in certain specialized types of businesses. For another, GAAP methods require that decisions be made about the timing for recording revenue and expenses, or they require that key factors be quantified.


It must choose which cost of good sold expense method to use and which depreciation expense method to use.

The pronouncement on GAAP prepared by the Financial Accounting Standards Board (FASB) is now more than 1000 pages long. And that doesn't even include the regulations and rules issued by the federal regulatory agency that jurisdiction over the financial reporting and accounting methods of publicly owned businesses - the Securities and Exchange Commission (SEC).

The mission of GAAP over the years has been to standardize accounting methods in order to bring about uniformity across all businesses. It must choose which cost of good sold expense method to use and which depreciation expense method to use.