What is the difference between GAAP Accounting and Tax Accounting?

GAAP are the standard framework of guidelines for financial accounting used in a given jurisdiction, known as accounting standards . These include standards, conventions, and rules that accountants follow in recording and summary and in the preparing at financial statements.

Tax Accounting  focuses on taxes rather than the appearance of public financial statements. Tax accounting is governed  by the Internal Revenue code which dictates the specific rules that companies and  individuals must follow when they preparing their tax returns.

Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business. Accounting also refers to the process of summarizing, analyzing and reporting these transactions.

Financial accounting is a specialized branch of accounting that keeps track of a company's financial transactions. GAAP is based on some basic underlying principles and concepts such as the cost principle, matching principle, full disclosure, going concern, economic entity, conservatism, relevance, and reliability.GAAP also addresses accounting practices that may be unique to particular industries, such as utility, banking, and insurance.

GAAP Accounting means Generally Acceptable Accounting principles to be followed for recording the transactions or for bookkeeping.

While Tax Accounting is specifically followed for preparing Taxation of specific Financial period.

Generally Accepted Accounting Principles (GAAP) are a common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.GAAP is based on some basic underlying principles and concepts such as the cost principle, matching principle, full disclosure, going concern, economic entity, conservatism, relevance, and reliability.GAAP also addresses accounting practices that may be unique to particular industries, such as utility, banking, and insurance.

Generally Accepted Accounting Principles (GAAP) are a common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.

In the United States, different accounting methods are used for various reasons, such as, to prepare and maintain different reports available for different reasons. Business accounting includes recording the financial transactions of a business, which can be recorded by using the GAAP or tax accounting. GAAP or the Generally Accepted Accounting Principle is a method of recording the financial transactions of public companies, whereas, the tax accounting is similar except that taxpayers can avail more options. Therefore, in order to know which accounting method is suitable for your business, it is important to know what these methods are, and the difference between the two.

History of GAAP and Tax Accounting

Due to the increased complexity of businesses, it was very important to standardize the accounting practices as financial accounting is considered as a backbone of any business. This is the reason why GAAPs were introduced in the United States by a body called the Financial Accounting Standard Board (FASB). FASB is considered as the highest authority in the U.S. to develop and maintain the GAAPs.

On the other hand, tax accounting was founded by ratifying the sixteenth Amendment of the United States constitution, which actually initiated the revenue collection agency formed back in. As time passed, different alterations, name changes, and reorganizations were made, and today, this authority is called the Internal Revenue Service.

GAAP IS A BASIC TO HANDLING THE ACCOUNTING PROCUDER

TAX ACCOUNTING IS FOR PREPARING THE TAX REPORTS