Your business relies on a number of components coming together to create a well-oiled, successful machine. One way of creating a unified environment between enterprises is by adopting the Generally Accepted Accounting Principles (GAAP) system of Canada.
What Is GAAP In Canada?
GAAP is a set of rules, standards, and principles that public companies must follow when making financial statements. GAAP rules guide you on how business transactions should be presented, disclosed, measured, and recognized in reports. If you are a smaller company that does most of your business domestically, you can choose to follow either GAAP or another Canadian set of accounting standards called the Accounting Standards for Private Enterprise (ASPE).
What Is International GAAP?
The Canadian Accounting Standards Board adopted international GAAP in 2006, which differed in subtle ways from Canadian GAAP. The major changes between the two standards are in how depreciation and interest expenses are treated. This change was done in sync with many countries all over the world moving to international GAAP.
Advantages of GAAP
Prior to GAAP, companies had their own accounting systems with different rules, time frames and methods. GAAP gives you consistent insight into your company’s performance, which leads to improvements in business operations by giving you an objective baseline to study your performance on an annual basis.
By providing all businesses in the entire country with one single standard system of accounting, clear comparison between companies is an easier feat to accomplish. This is important for investors and regulators, who can quickly assess your company’s finances rather than having to learn a new accounting system for every company.
Whether you follow GAAP or ASPE, both sets of rules are integrated into QuickBooks small business accounting software. Keep your books accurate and up to date automatically. Change the way you manage your finances now.