Final answer:
GAAP requires the application of the revenue recognition principle primarily to match revenues with expenses, ensuring the reliability and comparability of financial reports.
Step-by-step explanation:
The Generally Accepted Accounting Principles (GAAP) require the application of the revenue recognition principle because this principle ensures that revenue is recognized in the accounting period in which it is earned, which serves several purposes. Firstly, it provides a consistent and timely financial reporting framework, which enhances the comparability and reliability of financial information.
Secondly, by recognizing revenue when it is earned, irrespective of when the cash is received, the accounting principle aims to match revenues with expenses. This matching principle helps in presenting a more accurate picture of a company's financial performance and position during a particular accounting period.
Therefore, the correct answer to why GAAP requires the application of the revenue recognition principle is to match revenues with expenses (Option B), and not primarily to ensure timely financial reporting, avoid tax implications, or to increase shareholder dividends directly.