What is GAAP theory?

GAAP, or Generally Accepted Accounting Principles, refers to a set of accounting standards and guidelines used in the United States to ensure consistency, transparency, and comparability in financial reporting. These principles cover various aspects of financial statements, including recognition, measurement, and disclosure of financial information. GAAP is essential for public companies, as it helps maintain investor confidence and facilitates informed decision-making. The framework is overseen by the Financial Accounting Standards Board (FASB).