Maria Periz is a business consultant. She analyzed the business processes of one of her clients, Classics Companies, in November 2011. She prepared a report containing her recommendation for changes in some of the company's business practices. She presented Classics with the report in December 2011. Maria guarantees that her clients will save money by following her advice. She does not collect for the services she provides until the client is satisfied with the results of her work. In this case she received cash payment from Classics in February 2012.

Required

a. Define the acronym GAAP.

b. Assume that Maria's accountant tells her that GAAP permits Maria to recognize the revenue from Classics in either 2011 or 2012 . What GAAP rule would justify reporting the same event in two different ways? Write a brief memo explaining the logic behind this rule.

c. If Maria were keeping records for managerial reporting purposes, would she be bound by GAAP rules? Write a brief memo to explain how GAAP applies to financial versus managerial reporting.