Question

What is the definition of GAAP?

1) Generally Accepted Accounting Principles
2) Generally Accepted Auditing Procedures
3) Generally Accepted Actuarial Principles
4) Generally Accepted Administrative Policies

Answer 1

GAAP stands for Generally Accepted Accounting Principles. It is a set of accounting standards and guidelines used in the United States to ensure consistency and transparency in financial reporting.

Step-by-step explanation:

GAAP stands for Generally Accepted Accounting Principles. It is a set of accounting standards and guidelines used in the United States to ensure consistency and transparency in financial reporting. These principles are established by the Financial Accounting Standards Board (FASB) and provide a framework for how financial statements should be prepared and presented.

GAAP includes concepts and rules for recording, summarizing, and reporting financial information. Some key principles of GAAP include the accrual basis of accounting, the materiality principle, and the conservatism principle. Accrual basis accounting recognizes revenues and expenses when they are incurred, regardless of when cash is received or paid. The materiality principle states that insignificant information should not be included in financial statements, while the conservatism principle guides accountants to be cautious in recording uncertain events or outcomes. By following GAAP, companies can provide stakeholders with accurate and reliable financial information, helping users of the financial statements make informed decisions. GAAP is widely used in the United States and provides a standardized framework for financial reporting across different industries and sectors.