Question

which of the following statements describes gaap? 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:

• Option A is incorrect: GAAP is set by private standard-setting bodies (like the FASB in the US), not government-regulated.
• Option B is incorrect: Only publicly traded companies in the US are legally required to follow GAAP; private companies are not mandated.
• Option C is incorrect: GAAP requires/recommends accrual basis accounting, not cash basis.
• Option D is correct: Accrual basis accounting is the core method recommended by GAAP, as it matches revenues and expenses to the period they occur.

Answer:

D. GAAP recommends accrual basis accounting.