Accounting principles
If all those involved in the process of accounting followed their own system, or no system at all, he did y nothing to really say whether a company is profitable or not. Most companies follow the so-called generally accepted accounting principles, or GAAP, and there are huge volumes in libraries and bookstores devoted to just this topic. Unless a company otherwise, no matter which can read a financial statement are the hypothesis that the GAAP company used.
If not the principles of GAAP used for the preparation of financial statements, and then a company needs to clarify what other form of accounting, they are used to and are bound to avoid using titles in its financial statements that the person who is likely to mislead the investigation.
GAAP are the gold standard for the preparation of financial statements. Not to disclose that it has used the principles of GAAP, make a corporation legally liable for any misleading or misunderstood information. These principles were refined for decades and effectively have mastered, accounting and financial reporting of companies systems methods. Different principles for different types of business entities, these for-profit and non-profit companies, Governments and other companies.
GAAP are not cut and dried, however. They are guidelines and are often subject to interpretation. Estimates should be the time and they faith efforts to require accuracy. You have certainly heard of the term "creative accounting", and it is when a company pushes the envelope a bit (or more) their business more profitable that it would be in reality. It is also known as the numbers of massage. This may not be under the control and transform quickly into accounting fraud, also known as the cooking books. The results of these practices can be devastating and hundreds and thousands of lives, as in the case of Enron, Rite Aid and ruining others.
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