Changes in Accounting Principles Include Changes

question 6

Multiple Choice

Changes in accounting principles include changes:

• A)from FIFO to average cost for inventory.
• B)required because the FASB issues new accounting pronouncements.
• C)to the estimated useful life of a building.
• D)A and B.

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Definitions:

Ending Inventory

At the close of an accounting period, the valuation of merchandise ready for sale is identified by summing up the initial inventory with buys and deducting the expense of goods sold.

Ending Inventory

The total value of all inventory a company has in stock at the end of an accounting period, which is used to calculate the cost of goods sold.

Operating Expenses

The costs associated with running the day-to-day operations of a business, excluding the cost of goods sold.

Gross Profit

The difference between revenue and the cost of goods sold, indicating how efficiently a company produces goods or services.