Rules of Accounting Finance

Rules and regulations are very important in business finance and every business department. Accounting finance involves the intended effort of the business to assemble their financial paperwork, as well as the compulsory consideration of rules that are regulated by business organizations that have standardized these accounting methods.

Financial information also provides help to business organize for a long period. If in business no rules and regulation existed, financial statements would have no commonality, and would be too difficult to read and manage. The accounting standards that exist today have evolved over time to the system of rules that exists today.

In 1973, the Financial Accounting Standards Board was established to take the place of the Accounting Principles Board (APB) in order to evaluate and analyze the problems that are brought to their attention in the field of accounting. The process of reviewing the business issue and accounting related issues is long and boring but necessary to follow maintenance of the standard rules for accounting finance. FASB makes pronouncements to the approach of these issues which are referenced by accountants so that solutions can be found.

FASB is not a government agency and is financed on a private basis. One of the financial supporters of FASB is the AICPA, or the American Institute of Certified Public Accountants. Many CPAs are a part of this organization, and use FASB guidelines to be mindful of their behavior when conducting business.

FASB established the codes for financial statement preparation is called the Generally Accepted Accounting Principles

, but outside countries of the United States follow have their own accounting rules which are comparable to GAAP and FASB, and internationally, moves are being made to create a standardized method of compliance to financial statement principles which may take years to apply.

For the preparation of financial statements set standardized guidelines. GAAP provides users of those statements a best method of determining how reliable those statements are. Users of financial statements know that statements that do not follow the GAAP are less likely to be reliable data to determine the profitability of a business by. Businesses that choose to stray from the GAAP guidelines should inform their readers that they do not follow GAAP.

Publicly traded companies are also bound by the rules and guidelines of the Securities Exchange Commission (SEC) which ensure the protection of investors. The SEC is creating their own standards also.

Management level pay is based upon company performance. If the company performance is not recorded day to day basis in a proper method, executives make money that far exceeds what the business is capable of and creates a false picture of a company's performance. This false reporting causes the stock market to balloon by rewarding stock to companies who do not deserve it, and these methods have a bad effect on our economy. Business accounting that honors the GAAP (Generally Accepted Accounting Practices) creates a transparent persona, an air of trust and respect, from the users of their financial statements.