Generally Accepted Accounting Principles (GAAP) are a set of rules and guidelines that companies must follow when preparing financial statements. These standards were established to ensure consistency in how financial information is reported. GAAP provides guidance on the recognition, measurement, and disclosure of accounting transactions so that all investors can be sure they’re getting accurate and uniform information about a company’s financial health. Proper application of GAAP can improve the reliability of a company’s financial statements and the confidence of investors in a business.