generally accepted accounting principles (GAAP)

  

Definition

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 organization's 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.


Use this term in a sentence

  • As an accountant, it was important for me to know about the generally accepted accounting principles, because they would help guide me.

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  • You should always try to follow the GENERALLY ACCEPTED ACCOUNTING PRINCIPLES so that new hires will be able to catch up quickly.

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  • You can't 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.

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