When we talk about the rules of accounting, we talk about generally accepted accounting principles, otherwise known as GAAP. These are the rules that we play by. Just as when you decide you want to play a game, and everybody wants to be on the same page and wants to know what the rules are, all accountants should follow the same rules so that when we look at financial statements, or we look at historical documents regarding the financial position of a company, we know what they really mean. We're all playing by the same standards.

Consider that you may call one of your friends and say, "Let's get together and play some football." And you gather a group of people. And you arrive at the field in your American football regalia only to be met by another group of people who are dressed to play English football, or soccer. Obviously, you're following two different sets of rules and you're not going to be successful at either one.

GAAP are the rules, the generally accepted accounting principles. And these are created by several different groups that are responsible for improving those principles, or for creating the principles. FASB, the Financial Accounting Standards Board; the SEC, the Security and Exchange Commission; the AICPA, the American Institute of Certified Public Accountants; and the AAA, the American Accounting Association. Each of these groups has input into creating the rules that we follow, and it's very important that we follow these rules.

And throughout this course you will be hearing about different principles, and policies, and standards. And each one of these follows GAAP. So to explain what GAAP is, these are the generally accepted accounting principles that everybody plays by in the United States.