The GAAP is a set of accounting rules and principles which presents how the companies should employ accounting and prepare their financial statements, the standards and policies under the GAAP provide guidelines for the format and the provisions in the financial statements like the income statement, the balance sheet and the cash flow statement for a company.
The format of the balance sheet as per the GAAP is to depict the assets, the equity and the liabilities of the company. The total assets are equated to the total liabilities and equity as per the GAAP and are presented generally in the order of the decreasing liquidity. The GAAP however does allow for a company to present a classified or a non classified balance sheet whereby the reclassified balance sheet needs to have a similar format but additional categorization of the materials and items.
Consistency is one of the main principles of accounting under the GAAP which provides that the financial statements of a company should be consistent form a year to year and period to period basis. This requirement is put in order to make way for comparability of the financial statements from different periods. However classification changes in the statements are allowed which need to be publically announced.
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