Generally Accepted Accounting Principles (GAAP) are designed to provide guidance for which of the following?

• A. Auditing government agencies worldwide
• B. Preparing and presenting financial statements in the United States
• C. Setting international tax rates
• D. Regulating stock market trading

Answer: (B)

Verified step by step guidance

1. Understand the concept of Generally Accepted Accounting Principles (GAAP): GAAP refers to a set of accounting standards, principles, and procedures that companies in the United States must follow when preparing and presenting financial statements. It ensures consistency, transparency, and comparability in financial reporting.
2. Identify the scope of GAAP: GAAP is specific to the United States and does not apply to international accounting standards, which are governed by the International Financial Reporting Standards (IFRS). Therefore, GAAP does not set international tax rates or regulate stock market trading.
3. Eliminate irrelevant options: Auditing government agencies worldwide and setting international tax rates are outside the scope of GAAP. Similarly, regulating stock market trading is not a function of GAAP.
4. Focus on the correct purpose of GAAP: The primary purpose of GAAP is to provide guidance for preparing and presenting financial statements in the United States. This includes ensuring that financial information is accurate, consistent, and comparable across different organizations.
5. Conclude the correct answer: Based on the explanation above, the correct answer is 'Preparing and presenting financial statements in the United States.'