Generally accepted accounting principles are a set of rules, standards, and principles that Canadian public companies must follow when making financial statements. Most private companies of a larger size in Canada also follow GAAP standards. Smaller companies can follow GAAP or a Canadian set of accounting standards, the Accounting Standards for Private Enterprise, intended for smaller companies that do most of their business domestically. GAAP creates one standard system of accounting. This leads to clarity and allows for easy comparison between companies, even in different industries. This is important for investors and regulators, who can quickly assess a company’s finances rather than having to learn a new accounting system for every company. Prior to GAAP, companies had their own accounting systems, often with different rules, time frames, and methods. GAAP gives you consistent insight into your company’s performance. This insight can lead to improvements in business operations, giving you an objective baseline to study their performance on an annual basis. In 2006, the Canadian Accounting Standards Board adopted international GAAP, which differed in subtle ways from Canadian GAAP. The major changes between the two standards are how depreciation and interest expenses are treated. This change was done in sync with many countries all over the world moving to international GAAP. Both sets of rules are integrated into QuickBooks’ small business accounting software.
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