Question

Which of the following is a requirement for an accounting principle to be called ""generally accepted""?

A. Each company develops its own standards.
B. The principle has been accepted as appropriate because of its universal application.
C. An authoritative accounting rule-making body has established it in an official pronouncement.
D. An authoritative accounting rule-making body has established it or it has been accepted because of its universal application.

Answer 1

An accounting principle is "generally accepted" if it is established by an authoritative body or is universally applied. Generally Accepted Accounting Principles ensure consistent, high-quality financial reporting.

Step-by-step explanation:

The requirement for an accounting principle to be called "generally accepted" is: D. An authoritative accounting rule-making body has established it or it has been accepted because of its universal application. This means that for an accounting principle to be generally accepted, it must either be officially proclaimed by a recognized authority in the field, such as the Financial Accounting Standards Board (FASB) in the United States, or it must have gained widespread acceptance in practice due to its utility and broad applicability across various situations and entities.

Generally Accepted Accounting Principles (GAAP) are a common set of accounting standards and procedures that companies use to compile their financial statements. GAAP is a combination of authoritative standards set by policy boards and the commonly accepted ways of recording and reporting accounting information. These principles ensure consistency and a certain level of quality within financial reporting, which is essential for the users of financial information, such as investors and creditors.