Generally Accepted Accounting Principles (GAAP) are a set of standardized accounting principles, procedures, and guidelines used in the preparation and presentation of financial statements. GAAP provides a framework for consistency, comparability, and transparency in financial reporting, ensuring that financial information is reliable and meaningful.

GAAP is developed and maintained by various accounting standard-setting bodies, such as the Financial Accounting Standards Board (FASB) in the United States. These principles are widely recognized and followed by companies, auditors, and regulatory bodies to ensure the integrity of financial reporting.

The core principles of GAAP encompass several key concepts, including the accrual basis of accounting, the matching principle, the historical cost principle, and the consistency principle. These principles guide how revenues, expenses, assets, liabilities, and equity are recognized, measured, and reported.

GAAP covers a wide range of financial accounting topics, including revenue recognition, inventory valuation, depreciation and amortization, lease accounting, and financial statement presentation. It provides guidelines for financial statement elements such as balance sheets, income statements, and cash flow statements.

Compliance with GAAP is essential for companies to ensure consistency and comparability in their financial reporting, enabling stakeholders to make informed decisions based on accurate and reliable financial information. Adhering to GAAP also facilitates communication between businesses and investors, lenders, regulators, and other interested parties, fostering transparency and trust in the financial markets.