What does GAAP Stand for?
GAAP in accounting is an acronym for Generally Accepted Accounting Principles. GAAP accounting rules are used to regulate accounting and financial reporting in a particular country or territory.
How are GAAP Accounting Rules Established?
GAAP accounting rules are established from many sources but are mainly derived from the following:
- Accounting Standards
- Company legislation
- Statutory requirements
- Stock exchange requirements
The purpose of Generally Accepted Accounting Principles is to ensure that financial statements issued outside a business are compiled from the underlying accounting information in a consistent and understandable way. This consistency allows third parties such as investors, tax authorities, and bank mangers, to analyze and understand the financial statements and allows comparisons to be made with other businesses.
Our post on Accounting Principles provides additional information on the uses of Generally Accepted Accounting Principles accounting rules.
For further information see the Wikipedia GAAP definition.
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About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.