GAAP
Generally Accepted Accounting Principles - the standard framework for financial accounting in the US.
GAAP is the set of accounting standards established by the Financial Accounting Standards Board (FASB) that companies in the US follow when preparing financial statements. Key principles include revenue recognition, matching, full disclosure, and consistency. Publicly traded companies are required to follow GAAP, while private companies may choose to voluntarily.
Example
A startup seeking venture capital prepares its financial statements following GAAP so investors can compare performance against other companies using the same rules.
Why It Matters for Your Business
GAAP compliance makes your financial statements credible to lenders, investors, and partners—even for small businesses not legally required to follow it.
More Accounting Terms
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Related Financial Guides & Resources
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