Firms That Compile Financial Statements According to GAAP

question 91

Multiple Choice

Firms that compile financial statements according to GAAP:

• A)record income and expenses at the time they affect the firm's cash flows.
• B)have no discretion over the timing of recording either revenue or expense items.
• C)must record all expenses when incurred.
• D)can still manipulate their earnings to some degree.
• E)record both income and expenses as soon as the amount for each can be ascertained.

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Definitions:

Consistency

An accounting principle that requires accounting methods and principles to be applied in the same manner from period to period unless a change is justified.

Income Tax Expense

The amount of money a company or individual owes to the government based on the taxable income earned during a fiscal year.

Interim Period

A temporary or Middle phase in a fiscal year or financial reporting period, often used for assessing a company's performance partway through the year.

Segment Profit or Loss

The financial performance of a distinct unit within a company, often evaluated to assess its contribution to the overall business.