Another example of this is when calculating our liabilities. We want to buy this stack of paper for $200 in a few weeks. Due to this principle, we put our expected losses on the balance sheet. So, we'd have a liability account of $200 for paper.
That was a little confusing... did you get all of that?
Yeah! So this principle expects us to put our expected loss on our statements and makes sure that we put the correct amount of assets.
It's okay George! The principle of regularity dictates that our firm needs to very strictly adhere to established rules and regulations.
So now we're going to move onto the principle of regularity. Are you familiar with it?
Well... Not really....
We need to adhere to these rules and regulations, so that we can be held to a standard that our clients can expect!
Ah, okay! I understand.
Oh, no! Thank you! I think I understand everything now. I feel a lot more confident!
Those are all the principles for today! Is there anything else you want to go over?
I'm so glad I know the GAAPs! They will help me in becoming the best accountant ever! Ann was so nice to teach me everything!