Generally accepted accounting principles (GAAP),
Definition of Generally accepted accounting principles (GAAP):
Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States must follow GAAP when their accountants 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. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information.
Authoritative rules, practices, and conventions meant to provide both broad guidelines and detailed procedures for preparing financial statements and handling specific accounting situations.
Generally accepted accounting principles (GAAP) provide objective standards for judging and comparing financial data and its presentation, and limit the directors freedom in showing an unrealistic picture through creative accounting. An auditor must certify that the provisions of GAAP have been followed in reporting an organizations financial data in order it to be accepted by investors, lenders, and tax authorities. Most developed countries (Canada, India, Japan, UK, US, etc.) have their own GAAP which may differ from those of others in minor or major details. See also accounting.
GAAP may be contrasted with pro forma accounting, which is a non-GAAP financial reporting method. Internationally, the equivalent to GAAP in the United States is referred to as International Financial Reporting Standards (IFRS). IFRS is followed in over 120 countries, including those in the European Union (EU).
How to use Generally accepted accounting principles (GAAP) in a sentence?
- You cant just become a worker in the accounting workforce and make up the rules as you go. Not only should there be moral issues to contend with at times, but there are always generally accepted accounting principles that you have no choice but to comply with.
- As an accountant, it was important for me to know about the generally accepted accounting principles , because they would help guide me.
- You should always try to follow the GENERALLY ACCEPTED ACCOUNTING PRINCIPLES so that new hires will be able to catch up quickly.
Meaning of Generally accepted accounting principles (GAAP) & Generally accepted accounting principles (GAAP) Definition