Inventory Methods GAAP (Generally Accepted Accounting Principles) is the set of guidelines used to record and report inventories in a business’s financial statements. This includes how to count inventory, decide which items are done being produced, recognize when an item is sold, and determine how much inventory should be written off when it’s deemed unsellable. Properly managing your inventory using GAAP helps ensure accuracy in both your internal ledger and external reports. By understanding the principles set by GAAP, businesses are better able to properly value and control their inventory, making sure that their financial statements reflect the true value of their assets.