Describe the meaning and applicability of "Generally Accepted Accounting Principles".

GAAP is short for Generally Accepted Accounting Principles. GAAP is a large group of accounting standards and common industry usage that have been developed over many years, and that are used by businesses to:

• Properly organize their financial information into accounting records;
• Summarize the accounting records into financial statements; and
• Disclose certain supporting information

One of the reasons for using GAAP is so that anyone reading the financial statements of multiple companies has a reasonable basis for comparison, since all companies using GAAP have created their financial statements using the same set of rules. GAAP covers a broad array of topics, including:

• Financial statement presentation
• Assets
• Liabilities
• Equity
• Revenues
• Expenses
• Business Combinations
• Derivatives and hedging
• Fair Value
• Leases
• Non monetary transactions
• Subsequent Events
• Industry-specific accounting, such as airlines, extractive activities, and health care

The Deviation from certain principles and practices followed globally in the field of accounting will create innumerable practical difficulties and wrong interpretations.  In order to avoid this, It came to identify certain areas to which a uniform accounting procedures/principles  are applicable and generally known as GAAP.  GAAP is an international convention of good accounting practices. It recognised certain core principles to be followed to have a fair practice in accounting while disclosing to the  true and fair affairs of a  business entity.   In certain instances particular  deviations from these principles can be held liable.

Generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements