13
QuizMultiple Choice

Study Guide and Quiz

Question 13 • S25 Introduction to Business A (Theisen)

Which of the following statements describes GAAP?

Answer
A
GAAP standards are written and regulated by the government.
B
It is legally required that all companies meet GAAP standards.
C
Companies that meet GAAP standards usually use cash basis accounting.
D
GAAP recommends accrual basis accounting.

Explanation

GAAP (Generally Accepted Accounting Principles) uses accrual-basis accounting, recording revenue when it is earned and expenses when they are incurred, rather than only when cash changes hands. Therefore, the statement that GAAP recommends accrual basis accounting is correct. GAAP is established primarily by independent accounting standard setters, and not every company is legally required to follow it.

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