For External-Reporting Purposes, Generally Accepted Accounting Principles Require That Net

question 24

Multiple Choice

For external-reporting purposes, generally accepted accounting principles require that net income be based on:

• A) absorption costing.
• B) variable costing.
• C) direct costing.
• D) semivariable costing.
• E) activity-based costing.

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Definitions:

Contract

A legally binding agreement between two or more parties defining obligations and rights.

Equivalent Payments

Alternative payments that will result in the same future value at a later date.

Obligation

A duty or commitment to fulfil an act, usually as part of a contract or by law, such as the repayment of a loan.

Equal Payments

A series of identical payments made over a set period, commonly used in loans and installment purchases.