Generally Accepted Accounting Principles - GAAP

The common set of accounting principles, standards and procedures. GAAP is a combination of authoritative standards (set by policy boards) and the accepted ways of doing accounting.

These are the rules that companies are expected to follow. If a financial statement is not prepared using GAAP principles, be very wary!

That being said, keep in mind that GAAP is only a set of standards. There is plenty of room within GAAP for unscrupulous accountants to distort figures.

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