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What is GAAP?(Generally Accepted Accounting Principles) Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

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FAQs on What is GAAP?(Generally Accepted Accounting Principles) Video Lecture - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

1. What are GAAP?
Ans. GAAP, which stands for Generally Accepted Accounting Principles, are a set of accounting standards and guidelines that govern the preparation and presentation of financial statements. They ensure consistency, comparability, and transparency in financial reporting.
2. Why are GAAP important in accounting?
Ans. GAAP is important in accounting as it provides a standardized framework for financial reporting. By following GAAP, companies can ensure that their financial statements are accurate, reliable, and comparable to those of other entities. This enhances transparency, facilitates decision-making, and builds trust among stakeholders.
3. Are GAAP mandatory for all companies?
Ans. GAAP is not mandatory for all companies. However, in many countries, including the United States, publicly traded companies are required to follow GAAP for their financial reporting. Additionally, private companies often choose to adopt GAAP to enhance credibility and facilitate financial analysis.
4. Do GAAP evolve over time?
Ans. Yes, GAAP evolves over time to adapt to changes in business practices, economic conditions, and regulatory requirements. Accounting standard-setting bodies, such as the Financial Accounting Standards Board (FASB) in the United States, regularly update and issue new accounting standards to ensure GAAP remains relevant and reflects the current business environment.
5. Can companies deviate from GAAP?
Ans. Companies may deviate from GAAP under certain circumstances, but it requires proper justification and disclosure. Departures from GAAP are typically allowed when compliance would result in misleading financial statements or when the company is applying alternative accounting methods that are deemed more appropriate for its specific circumstances. However, such deviations should be explained and disclosed in the financial statements to ensure transparency.
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