GAAP is the term used in the context of accounting practices followed by majority of companies in the world. Full form of GAAP is Generally Accepted Accounting Principles, these principals ensure that firms across the globe follow more or less the same procedures for recording the accounting transactions and hence paving the way for a common platform where various companies across the world can be compared and evaluated by all the interested parties like investors, creditors, debtors, government, employees etc…, to see whether the firm is presetting true financial position or not.
However one shout not be too naïve in believing that firm which has followed the GAAP is good because there are many loopholes using which the company can window dress the accounts leading to false picture about the financial position of the business.