Why must accounting report be prepared according to specific procedures (GAAP)? Should we allow businesses some...

Why must accounting report be prepared according to specific procedures (GAAP)? Should we allow businesses some flexibility or creativity in preparing financial statements.

Expert Solution

Generally Accepted Accounting Principles (GAAP) refers to refers to the set of accounting principles, standards and principles that companies need to follow while compiling their financial statements. The accounting statements needs to be prepared as per GAAP guidelines because it makes the information reliable and also maintains consistency in financial reports. If every company prepares its own report it would not be possible to evaluate reports, compare companies, and interpret the reported information. GAAP reporting style also makes it easier for the investors to analyze and extract useful information. It also helps in comparison of financial information across different companies.

Thus, considering the benefits of the GAAP guidelines, it is advisable not to allow businesses some flexibility or creativity in preparing financial statements. Their should be uniform rules for all companies.

Rahul Sunny answered 2 years ago

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