Which of the Following Is Not True About Generally Accepted

question 53

Multiple Choice

Which of the following is not true about generally accepted accounting principles (GAAP) ?

• A) GAAP provide specific guidelines as to how to account for specific events impacting the financial performance of the firm.
• B) The scrupulous application GAAP accounting rules does ensure consistency in comparing one firm's financial performance to another.
• C) It is customary for definitive agreements of purchase and sale to require that a target company represent that its financial books are kept in accordance with GAAP.
• D) GAAP guarantees that a firm's financial books are accurate.
• E) Differences between how a firm records actual financial transactions and how they should be recorded based on GAAP may indicate fraud or mismanagement.

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Definitions:

Revenue

The total amount of money received by a company for goods sold or services provided during a certain period.

Market Price

The current price at which an asset or service can be bought or sold in a given market.

Long Run

A period in economics where all factors of production and costs are variable, allowing companies to adjust to achieve the most efficient scale of operation.

Operating Profits

Earnings before interest and taxes (EBIT), representing the profit from a business's normal core business operations.