Generally Accepted Accounting Principles (GAAP)
The standard set of accounting rules and guidelines used by US businesses for financial reporting, set by the Financial Accounting Standards Board (FASB).
Detailed Explanation
GAAP defines how revenue is recognized, how assets and liabilities are measured, how leases and stock-based compensation are reported, and dozens of other rules that drive comparability across companies. Public companies must report in GAAP under SEC rules. Private companies often follow GAAP for lender or investor purposes but may use simpler tax-basis or cash-basis reporting internally. International companies generally use IFRS instead. The transition between GAAP and tax-basis numbers is reconciled on Schedule M-1 (Form 1120) or Schedule M-3.
Related TS CPA Service
Credible financial statements for lenders, investors, regulators, and stakeholders.
Learn about Audit & CompilationRelated Terms
Bookkeeping
The systematic recording, classification, and reconciliation of a business's financial transactions to produce accurate financial statements.
Accrual vs Cash Basis Accounting
Two methods for timing when income and expenses are recognized: cash basis records transactions when money changes hands, accrual records them when economic activity occurs.
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