Generally Accepted Recordkeeping principles and generally accepted accounting principles

Generally Accepted Recordkeeping principles and generally accepted accounting principles

Generally Accepted Recordkeeping principles and generally accepted accounting principles are rules provided by a governing body to be used globally by companies in conducting business activity. This assignment describes the differences and similarities between these two generally accepted principles.

GAAP is used by accountants to prepare and audit financial statements of the company. In contrast, GARP is used to govern and manage Information through proper record keeping, security, maintenance, and organization of records in an organization. GAAP applies conservatives where losses and expected gains are not considered. This restricts objectivity and disclosure while GARP ensures retention of all Information records hence ensuring accountability and compliance (Julie G. 2015).

GARP ensure disposition of Information where records are destroyed securely and other files stored in libraries and museums. Simultaneously, GAAP in the deletion and erasing of data could present incompatibility on the balance sheet. GAAP allows the use of credit and cash in carrying out business while GARP only provides Information on the management of a program. GAAP is costly and requires a lot of time to raise the cost of operations for small firms, while GARP is cheap and easy to use.

Since companies differ in size, capacity, and style, it isn’t easy to apply it in all situations. In contrast, GARP, on the other side, can be used by all organization record keeping. GAAP is defined by money measurement where only money transactions are recorded, meaning that they don’t consider the effect of inflation on the company’s accounts (Ruppel, 2017). Still, GARP only considers the maintenance of records in an organization; hence documentation is the critical measurement tool.

Both GAAP and GARP ensure accountability whereby  GAAP provides rules to be used by accountants in any place and In different sectors hence reducing personal influence. At the same time, GARP assigns Executive Officer to audit and oversee records in an organization. The generally accepted Recordkeeping principle is usually accepted. The public uses auditing principles, private, non-profit, small, and large companies to audit and prepare information records and accounts Larkin and DiTommaso, 2018). These principles are considered globally bringing uniformity in record keeping and accounting practices

In the method of revenue recognition, both use step by step principles. This enables better control of accounting and record-keeping functions (Force, 2013). When constructing a record, the Information generated ensures integrity by following and obeying policies and procedures set by an organization. This is also in line with GAAP that provides accounting information that is valid and truthful through documents such as sales invoices and cash memos.

The two principles ensure that the organization retrieves Information in time and that it is accurate and efficient. GARP backup information routinely while at the same time locate and identify the records needed. GAAP, on the other hand, ensures that accounting information flows on time, enabling the accountant to make decisions promptly. Both Principles are generally used and accepted around the world, companies can compare and benchmark with other companies that use the same standards (Carpenter, and Feroz, 2010). The principles aid in communications between the employers, employees, and all the customers since they give guidelines for relating. Companies that use these standards find trust with the clients since they are principles that are generally accepted internationally.

The principles ensure compliance of laws and policies through standard practices. To ensure compliance, GARP provides best practices in the industries while GAAP ensures compliance by maintaining account books through the double entry. GARP AND GAAP reduce human error and human manipulation since all accounts and records are maintained as per the guidelines; thus, companies ensure records and accounts satisfy the business enterprises.

Reference

Force, D. C. (2013). Pursuing the “usual and ordinary course of business”: An Exploratory Study of the role of Recordkeeping Standards in the Use of Records as Evidence in Canada (Doctoral dissertation, University of British Columbia).

Julie, G. (2015). The Principles and External Audits. Information Management, 49(4), 24.

Carpenter, V. L., & Feroz, E. H. (2010). Institutional theory and accounting rule choice: an analysis of four US state governments’ decisions to adopt generally accepted accounting principles. Accounting, Organizations, and society, 26(7-8), 565-596.

Ruppel, W. (2017). Wiley GAAP for Governments 2017: Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments. John Wiley & Sons.

Larkin, R. F., & DiTommaso, M. (2018). Wiley Not-for-profit GAAP 2018: Interpretation and Application of Generally Accepted Accounting Principles. John Wiley & Sons.