Generally Accepted Accounting Principles (GAAP) require that financial information possess which of the following characteristics?

• A. Uniformity and tax compliance
• B. Relevance and reliability
• C. Flexibility and subjectivity
• D. Historical cost and secrecy

Answer: (B)

Verified step by step guidance

1. Understand the purpose of Generally Accepted Accounting Principles (GAAP), which is to ensure that financial information is useful and trustworthy for decision-making.
2. Recognize that GAAP emphasizes the importance of financial information being relevant, meaning it should be applicable and helpful for users in making economic decisions.
3. Understand that GAAP also requires financial information to be reliable, meaning it should be accurate, verifiable, and free from bias.
4. Eliminate incorrect options by analyzing their alignment with GAAP principles: 'Uniformity and tax compliance' is not a primary focus of GAAP, 'Flexibility and subjectivity' contradicts the need for reliability, and 'Historical cost and secrecy' does not align with transparency and relevance.
5. Conclude that the correct characteristics required by GAAP are 'Relevance and reliability,' as these ensure the financial information serves its intended purpose effectively.