Which term refers to the standards and rules that accountants follow while recording and reporting financial activities?

• A. International Monetary Fund (IMF)
• B. Generally Accepted Accounting Principles (GAAP)
• C. Tax Accounting
• D. Managerial Accounting

Answer: (B)

Verified step by step guidance

1. Understand the question: The problem is asking for the term that refers to the standards and rules accountants follow while recording and reporting financial activities.
2. Identify the key concept: Standards and rules for financial reporting are established to ensure consistency, transparency, and comparability in accounting practices.
3. Clarify the options: Review the provided choices: (1) International Monetary Fund (IMF), (2) Generally Accepted Accounting Principles (GAAP), (3) Tax Accounting, and (4) Managerial Accounting.
4. Explain the correct term: The correct term is 'Generally Accepted Accounting Principles (GAAP)', which is a set of accounting standards and guidelines used primarily in the United States to ensure accurate and consistent financial reporting.
5. Differentiate GAAP from other options: (1) IMF is an international organization focused on global financial stability, not accounting standards. (2) Tax Accounting deals with tax-related financial activities. (3) Managerial Accounting focuses on internal decision-making processes rather than external reporting standards.