Question

What is GAAP? For what and by whom were they created? Pick one principle and explain its meaning and how it might be applied in accounting.

Answer 1

GAAP stands for Generally Accepted Accounting principles

It is created by policy boards of ICAI and the commonly accepted accepted ways of recording and reporting accounting information.

It is created to create a uniformity among all the corporate bodies i presenting their financials to the users.

For Example:

1) The Principle of Prudence:This principle says to account for all the expected losses and not for expected revenues.

For example if we have a doubt on the debtors whether it is receiveble or not we have to create provision for bad debts to the extent of that bad debtors.

This creates uniformity among all the corporate bodies in presenting their financials