GAAP : Generally Accepted Accounting Principles.
(a) Business Entity Concept: According to this concept, a business firm is treated as a unit separate and distinct from its owners. A completely separate set of books is kept for the firm and business transactions are recorded from the firm's point of view. The capital provided by the owner is treated as a liability of the firm. Interest on capital is treated as an expense of business. Similarly, the money/goods withdrawn by the proprietor from the firm for his personal use is treated as drawings. The concept of separate entity is necessary for ascertaining the true net profits and financial position of a business firm.
(b) Money Measurement Concept : According to this principle only those transactions can be recorded in the books of accounts, which can be expressed in the terms of money. This makes accounting records relevant, simple and easy to understand. For example, the retirement of the chairman of the company cannot be recorded because it is not possible to measure the monetary effect of retirement except in terms of gratuity and other benefits payable to the chairman.