Q.Why does India require companies to follow Accounting Standards issued by the ICAI, rather than allowing each company to choose its own accounting policies freely?

GAAP means Generally Accepted Accounting Principles — the common rules that guide accounting practice.

GAAP refers to the Generally Accepted Accounting Principles — the body of concepts, conventions, rules and procedures that are widely accepted and followed in recording, classifying, summarising and reporting accounting transactions. They give uniformity and comparability to financial statements.

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Accounting Standards in India are issued by the ICAI, so the answer is (c).

Accounting Standards are written policy documents that lay down uniform rules for the recognition, measurement, presentation and disclosure of accounting transactions, so that financial statements are comparable and reliable.

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GAAP stands for Generally Accepted Accounting Principles, so the correct option is (a).

In the Tamil Nadu HSC Commerce (Accountancy) syllabus, the conceptual framework chapter explains that accounting is not done arbitrarily — it follows a common set of rules understood and accepted across the profession. These rules are called Generally Accepted Accounting Principles (GAAP).

• GAAP is the collective term for the accounting concepts (e.g. business entity, going concern, money measurement, cost, dual aspect, matching, realisation) and conventions (e.g. consistency, conservatism, full disclosure, materiality) that make financial statements uniform, comparable and reliable.
• Accounting Standards are formulated on the foundation of these generally accepted principles, which is why they carry authority.

Examining the options:

• (a) Generally Accepted Accounting Principles — correct full form. …