Generally Accepted Accounting Principles (GAAP)
Generally accepted accounting principles, or GAAP for short, are the accounting rules used to prepare and standardize the reporting of financial statements, such as balance sheets, income statements and cashflow statements, for publicly traded companies and many private companies in the United States. GAAP-based income is measured so that the information provided on financial statements is useful to those making economic decisions about a company, such as potential investors and creditors.
GAAP is implemented through measurement principles and disclosure principles. Measurement principles recognize and determine the timing and basis of items that enter the accounting cycle and impact the financial statements, such as the period in which transactions will be recorded. Disclosure principles determine what specific numbers and other information are essential to be presented in financial statements. [1]
Main financial statements required by US GAAP
| Nonprofits | For Profit Corporations |
|---|---|
| Statement of Financial Position | Balance Sheet |
| Statement of Activities | Income Statement or Statement of Operations |
| Statement of Functional Expenses (for some organizations) | |
| Statement of Cash Flows | Statement of Cash Flows |
| Statement of Stockholders' Equity | |
| Notes to Financial Statements | Notes to Financial Statements |
BoardSource: Take the Fear out of Financial Statements
Resources
LegalZoom: General Accepted Accounting Principles or GAAP: What does it mean?
FASB: Financial Accounting Standards Board
AccountingCoach: Introduction to Accounting Principles