A widely accepted set of rules, conventions, standards and procedures for reporting financial information, as established by the Financial Accounting Standards Board(FASB) are called Generally Accepted Accounting Principles (GAAP).
They are common set of accounting principles, standards and procedures that companies/entities use to compile their financial statements.
GAAP is to be followed by companies so that investors have optimum level of consistency in the financial statements they use when analysing companies for investment purposes. GAAP cover such aspects like revenue recognition, balance sheet items classification and their valuation, treatment and presentation. Suppose we give to prepare our accounts from five different Accountants. After some time all accountants come with their accounts by showing different profit, since all of them followed different accounting policies. In that case it will not serve the purpose of accounting. So it is necessary that there should be some principle, so that all accounts prepared by any number of accountant will show same amount of profit. So to avoid confusion and to ensure uniformity, GAAP (Generally Accepted Accounting Principles ) are framed.

v  Accounting Principles

v  Accounting Concepts

v  Accounting Conventions

v  Basic AssumptionConcepts/Principles/Conventions


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