What is generally accepted accounting principles?

Generally Accepted Accounting Principles (GAAP) are a set of accounting standards, principles, and procedures that are widely accepted and followed by companies when preparing and presenting their financial statements. GAAP provides a standardized framework for recording, reporting, and interpreting financial information, ensuring consistency, comparability, and transparency in financial reporting.

GAAP is developed and maintained by various accounting standard-setting bodies, such as the Financial Accounting Standards Board (FASB) in the United States and the International Financial Reporting Standards (IFRS) Foundation globally. These principles cover a wide range of topics, including revenue recognition, expense recognition, asset valuation, financial statement presentation, and disclosure requirements.

The purpose of GAAP is to provide reliable and relevant financial information to investors, creditors, and other stakeholders, enabling them to make informed decisions about a company's financial health and performance. Compliance with GAAP is often required by regulatory bodies, stock exchanges, and lending institutions.

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