What does GAAP stand for in accounting?

GAAP stands for Generally Accepted Accounting Principles. These principles are a framework of accounting standards, principles, and procedures that organizations follow when compiling financial statements. GAAP is crucial because it ensures consistency, transparency, and comparability of financial information across different entities. This standardization is particularly important for investors, creditors, and regulators who rely on accurate financial data to make informed decisions. By adhering to GAAP, companies can enhance their reliability and accountability in financial reporting.