Association of Chartered Certified Accountants (ACCA) Certification Practice Test

GAAP stands for what?

1. General Accounting Analysis Procedure

2. Generally Accepted Accounting Practice

3. Guidelines for Auditing Accounts Professionally

4. General Accounting and Auditing Principles

The correct answer is: Generally Accepted Accounting Practice

Generally Accepted Accounting Practice is the correct interpretation of the acronym GAAP. This term is widely recognized and used in the field of accounting to refer to a set of rules, standards, and procedures that govern financial reporting and accounting practices. GAAP provides a framework for financial reporting in a consistent manner, ensuring transparency, comparability, and integrity in the financial statements prepared by organizations. It plays a crucial role in enabling stakeholders—including investors, regulators, and auditors—to understand and assess the financial performance and position of a company. Different countries may have their own GAAP frameworks, such as the U.S. GAAP, which might differ from the International Financial Reporting Standards (IFRS) adopted globally. The other choices refer to phrases that do not accurately represent the established accounting standards or practices recognized broadly in the profession. While they may contain elements of accounting terminology, they do not have relevance or acceptance as a standardized term in accounting.