How GAAP provide guidelines in preparation of Financial Statements? Explain with example.

How GAAP provide guidelines in preparation of Financial Statements? Explain with example.

by Faisal Khan Tushar -
Number of replies: 0

Per generally accepted accounting principles (GAAP), companies are responsible for providing reports on their cash flows, profit-making operations, and overall financial conditions.

GAAP guidelines require businesses to prepare financial statements according to the matching principle using the accrual basis of accounting. Because the objective is to ensure that expenses match with revenues, expenses are reported in the period in which the expense is incurred regardless of when the expense is paid.