Consulting Case Interview Practice Questions

Answer -E - One purpose of GAAP is to provide comparability between accounting periods. Each accounting period must follow the same set of rules and standards to ensure that the information is gathered, presented, and reported in the same way from one accounting period to the next, so that the progress of the company can be analyzed.

Key Takeaway: GAAP provides comparability between accounting periods to ensure that comparisons can be made and to check the progress of the company. GAAP provides rules that make sure that users of the financial statements are comparing “apples to apples” when reviewing financial statements. If a method is changed between accounting periods, such as accounting for inventory in a different way, there should be a valid reason for the change and it should be noted on the financial statements.