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Financial accounting and reporting are governed by a set of rules and standards called generally accepted accounting principles (GAAP). In documenting, evaluating, and reporting financial data for a business, accountants are required to adhere to GAAP principles, which are a set of rules and processes.
The GAAP principles guarantee uniform financial statement preparation and deliver accurate and pertinent information to users, including investors, creditors, and regulators. The Financial Accounting Standards Board (FASB) in the US and the International Accounting Standards Board (IASB) globally are two of the bodies that developed these principles.
Revenue recognition, inventory value, and depreciation procedures are only a few of the accounting topics that are covered by the GAAP principles. They also cover the balance sheet, income statement, and cash flow statement presentations of financial statements.
Accountants maintain uniformity and accuracy in the preparation of financial statements by adhering to GAAP standards, which promotes openness and responsibility in financial reporting. Although many private companies also opt to employ GAAP principles for their financial reporting, the application of GAAP principles is required in the US for publicly traded corporations.
