Question

US GAAP is associated with

• A. ranking of companies
• B. accounting practices
• C. health services
• D. none of these

Hint:

GAAP expands to Generally Accepted Accounting Principles, so think about which field sets rules for preparing financial statements.

Answer 1

The Correct Option is B

GAAP stands for Generally Accepted Accounting Principles. It is a set of rules and standards that companies follow while preparing their financial statements, such as the balance sheet and profit and loss account. US GAAP is simply the version of these rules followed in the United States. Let's check the options.

1. ranking of companies: GAAP does not rank or rate companies. Rating agencies like Moody's or CRISIL do that job, not an accounting standard.
2. accounting practices: This is exactly what GAAP is about: a common set of accounting rules that companies must follow so that their financial reports are consistent and comparable.
3. health services: GAAP has no link to hospitals, medicine, or health care. This choice mixes up an unrelated field.
4. none of these: Not needed, since option (2) is a direct match.

So US GAAP is a framework of accounting rules and disclosure practices, which makes "accounting practices" the right answer.

Let's summarize:

• GAAP is short for Generally Accepted Accounting Principles.
• It governs how companies in the US prepare and present their financial statements.

The answer is option (2).