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The GAAP Consistency Principle: How It Affects Your Business

Author : Bill Gerber
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If you’ve been shopping around for bookkeeping services, you’ve probably heard about the GAAP principles for accounting, or Generally Accepted Accounting Procedures.

One of the key principles of these standards is the GAAP consistency principle. The GAAP consistency principle states that when a business has fixed a method for the accounting treatment of an item, it will enter all similar items in the exact same way in the future.

The GAAP consistency principle applies to line items on all your financial statements, including your cash flow statements, balance sheets, and AP/AR reports. Once your bookkeeper establishes one method of entering data, all similar items should be entered in the same way. It also applies to accounting methods: GAAP endorses and recommends accrual based accounting.

When the GAAP Consistency Principle Creates a Challenge
If you struggle with high turnover in your accounting department, the GAAP consistency principle is one of the first to suffer. Many independent bookkeepers have their “own way” of doing things. At, every one of our bookkeepers and financial controllers follows the same processes and procedures.

If your bookkeeper is ever out sick, or even leaves the company (although our turnover rate is very low), the replacement will manage your books in the exact same way.

Why Is the GAAP Consistency Principle Important?
The GAAP consistency principle makes it easy for:

  • Outside auditors to review your books
  • Angel investors and VC firms to assess your finances when they’re deciding whether or not to fund your company
  • You and other key decision makers in your company to review your financial statements to make smart decisions about the company’s future

Don’t compromise when it comes to GAAP. Hire an outsourced accounting firm that understands how to follow policies and procedures every time.

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