The General Accepted Accounting Principles is a presentation of precisely defined procedural approaches to accounting that a company or individuals must use when compiling their financial data (Stanko & Zeller, 2010). It is, therefore, always mandatory for any organization or individual to follow these set of rules to the latter to ensure that they do not end up going against the requirements. These principles make it possible for financial information to be properly presented in clear and understandable ways. In the case where one is unable to submit their financial data in the required format, they are always at liberty to hire outside firms or personnel to help in the same.
The personal financial statements prepared by Jane Wilson do not conform to the accepted accounting principles, which are shortened to GAAP. The reason for this is because she uses historical cost in her presentation. Historical cost information is not part of the GAAP and thus excludes this presentation as being GAAP viable. According to the statement of position (SOP) 82-1, it is stated that the projected current value of data has to be more relevant for their decisions more than the historical cost information is. However, a public accounting firm cannot conduct any form of audit on Jane Wilson’s statement. The hindrance of their auditory role further implies that they cannot issue any unmodified opinion in regards to her possessions. The reason for this is because according to the GAAP, every asset that is a person’s possession is valued at an estimate of the value they have presently. As for Jane, she presents the historical cost information which is not the current cost thus not relative.
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References
Stanko, B., & Zeller, T. (2010). The arrival of a new GAAP: International financial reporting standards. Journal of Business & Economic Research , 8(10), 27-38.
