Final answer:
Accounting principles followed by accountants when preparing financial statements are referred to as GAAP. These principles ensure consistency, accuracy, and comparability of financial statements.
Step-by-step explanation:
The rules followed by accountants when preparing financial statements are referred to as Generally Accepted Accounting Principles (GAAP). These principles ensure that financial statements are prepared in a consistent and uniform manner, enabling users to make meaningful comparisons between different companies' financial statements. GAAP includes guidelines for recording transactions, presenting financial information, and disclosing relevant information in the financial statements.
For example, one principle of GAAP is the accrual basis of accounting, which requires that revenues and expenses be recognized when they are earned or incurred, rather than when cash is received or paid. This ensures that financial statements accurately reflect the financial position and performance of a company.
Other principles of GAAP include the consistency principle, which requires that accounting methods and practices be applied consistently from one period to another, and the materiality principle, which states that financial statements should disclose all material facts that could influence the decisions of users.