As you’ve seen in this module, the accounting profession is self-governing for the most part. The SEC has delegated rule-making authority to the FASB, which was created by the AICPA, and even though not all companies are subject to SEC oversight, GAAP provide guidance for even small, privately held companies.
Remember, the end goal of accounting is to provide useful information, and that information is intended for external users, like lenders and investors, usually in the form of financial statements. The financial statements are the scorecards: they illustrate what the business owns and what it owes (balance sheet) and how well it did during the last year (income statement). GAAP gives accountants the rules of keeping score, so that everyone who uses the financial statements is keeping score the same way. Because the FASB has a solid rule-making process, the practices it defines are well-thought-out, reasonable, and relevant.
You’ve learned now about the FASB, accrual basis accounting, and accounting standards, so now it’s time to put all this information to use.