Definition

Generally Accepted Accounting Principles—the rulebook for how to count money in the United States, though it somehow still permits creative interpretation.

Example Usage

We have to report under GAAP, so we can't use the accounting method our tax advisor suggested.

Origin

Formalized in the 1930s after the Great Depression

Fun Fact

GAAP is intentionally flexible, which is why two companies with identical finances can report different results

Source: FASB (Financial Accounting Standards Board)

Related Terms

Intermediate

valued

To estimate the monetary or relative worth of something, or to hold something in high regard—corporate shorthand for 'we think this matters, please act accordingly.'

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cookie jar reserves

Reserves that companies stash away during good times to smooth out earnings during bad quarters, like a financial rainy day fund that violates accounting principles. It's earnings management dressed up in respectable terminology.

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Write-Off

A tax deduction that allows businesses to subtract expenses from their taxable income, famously misunderstood by everyone thanks to that one Seinfeld episode. Half the population thinks a write-off means something is free, which keeps accountants employed correcting people at parties.

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operating margin

Operating income divided by revenue, showing what percentage of sales remains after covering operating expenses but before interest and taxes. It's the profitability measure that reveals whether your business model works or you're just moving money around creatively.

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Accounts Payable (AP)

Money your company owes to vendors and suppliers—basically an IOU list that keeps accountants awake at night.

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smoothing

The practice of manipulating earnings to reduce volatility and create the appearance of steady, predictable growth, because investors apparently can't handle reality. It's the financial equivalent of Instagram filters for your P&L.

💰 Finance / Accounting

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