The full form of GAAP is Generally Accepted Accounting Principles. GAAP is a set of standards set by the accounting profession. These standards indicate how to report economic events. 

Businesses are required to adhere to GAAP guidelines and prepare financial statements utilizing the matching principle and the accrual foundation of accounting. No matter when they are paid, expenses are documented in the period they are incurred in order to ensure that revenues equal expenses.

For example, all companies in the European Union follow GAAP guidelines. Because they have to show their revenues before regulating bodies to keep getting more investors.