Which principles are commonly used to prepare U.S. financial statements?

The preparation of financial statements in the United States primarily adheres to Generally Accepted Accounting Principles, commonly known as GAAP. This collection of rules and standards provides a consistent framework for financial reporting, ensuring transparency, consistency, and comparability of financial information across different organizations.

GAAP encompasses a wide range of accounting principles, including guidelines on revenue recognition, balance sheet classification, and the preparation of cash flow statements. By following GAAP, businesses aim to provide a clear and accurate picture of their financial health to stakeholders such as investors, regulators, and the public.

Other choices like International Financial Reporting Standards (IFRS) are relevant in many countries but are not the primary framework for U.S. companies. Tax Accounting Principles are specific to tax reporting and do not encompass the full scope needed for financial statements. Quality Management Standards pertain more to operational effectiveness and efficiency rather than financial accounting practices. Thus, GAAP stands as the critical standard for financial reporting in the U.S.