GAAP stands for Generally Accepted Accounting Principles — a framework of accounting standards, rules, and procedures used primarily in the United States. Every public company must follow GAAP when preparing its financial statements.
GAAP ensures consistency, transparency, and comparability across financial reports. When every company follows the same rules, investors can meaningfully compare Apple's financials with Microsoft's — apples to apples (no pun intended).
GAAP is maintained by the Financial Accounting Standards Board (FASB). Outside the US, most countries follow IFRS (International Financial Reporting Standards). While similar in many ways, GAAP and IFRS have key differences in areas like revenue recognition and inventory accounting.