Standard accounting practice

Accounting

Historical cost Constant purchasing power Management Tax
Major types Auditing Cost Forensic Financial Fund Governmental Management Social Tax
Key concepts Accounting period Accrual Constant purchasing power Economic entity Fair value Going concern Historical cost Matching principle Materiality Revenue recognition Unit of account
Selected accounts Assets Cash Cost of goods sold Depreciation / Amortization Equity Expenses Goodwill Liabilities Profit Revenue
Accounting standards Generally-accepted principles Generally-accepted auditing standards Convergence International Financial Reporting Standards International Standards on Auditing Management Accounting Principles
Financial statements Annual report Balance sheet Cash-flow Equity Income Management discussion Notes to the financial statements
Bookkeeping Bank reconciliation Debits and credits Double-entry system FIFO and LIFO Journal Ledger / General ledger T accounts Trial balance
Auditing Financial Internal Firms Report
People and organizations Accountants Accounting organizations Luca Pacioli
Development History Research Positive accounting Sarbanes–Oxley Act
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Standard accounting practices require publicly traded companies to follow certain accounting rules when presenting financial statements so that the readers of the statements can easily compare different companies. Private companies are also often required by banks and shareholders, for example, to present information according to their specified rules.

Usually, countries practicing civil law system write standards into law and countries with English common law systems have private organizations to set the rules. There are specialist organizations that can arrange for the set-up of an accounting practice with a franchise business model which can prove successful from the out-set.

Common accounting standards

Some commonly used accounting standards include:

International

International Financial Reporting Standards

Domestic

China - Chinese Accounting Standards (Zhōngguó qǐyè kuàijì zhǔnzé 中国企业会计准则)
Canada - Generally Accepted Accounting Principles
France - Generally Accepted Accounting Practice (Plan Comptable Général)
Germany - Generally Accepted Accounting Practice (Grundsätze ordnungsmäßiger Buchführung)
India - Indian Accounting Standards
Nepal - Financial Reporting Standards
Russia - Russian Accounting Principles (RAP)
United Kingdom - Generally Accepted Accounting Practice
United States - Generally Accepted Accounting Principles

Rationale for uniform practices

The lack of transparent accounting standards in some nations has been cited as increasing the difficulty of doing business in them. In particular, the Asian financial meltdown in the late 1990s has been partially attributed due to the lack of detailed accounting standards. Giant firms in some Asian countries were able to take advantage of their poorly devised accounting standards to cover up immense debts and losses, which yielded a collective effect that eventually led the whole region into financial crisis.

Limitations

The accounting scandals of the early 21st century, which affected companies such as Worldcom and Enron, have shown the limitations of accounting standards in the United States.

Standard accounting practice

Common accounting standards

Rationale for uniform practices

Limitations

Further reading