Generally Accepted Accounting Principles (GAAP)

What are Generally Accepted Accounting Principles (GAAP)?

Generally Accepted Accounting Principles (GAAP) are a set of accounting standards, conventions, and rules used to prepare, present, and report financial statements for a wide variety of entities, including publicly traded and privately held companies, non-profit organizations, and governments. GAAP aims to improve the clarity, consistency, and comparability of financial reporting.

Short Description: A set of standardized guidelines for financial accounting and reporting, aimed at ensuring consistency and transparency across companies.

• Relevance: Ensures that financial statements are relevant to the decision-making processes of stakeholders.
• Consistency: Provides a standardized method for preparing financial statements, making them comparable across periods and entities.
• Fair Presentation: Aims to provide a true and fair view of a company's financial position.

Compliance with GAAP is crucial as it ensures that financial statements are not misleading, supporting investor confidence and financial market stability.