GAAP stands for Generally Accepted Accounting Principles. GAAP are a collection of commonly-followed accounting rules and standards for financial reporting.

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.

For example any companies must follow GAAP to do any kind of financial activities. More precisely they must show their revenues before regulating bodies if they want to start up a business.