What Is the Main Reason That It Is Necessary for Public

question 79

Multiple Choice

What is the main reason that it is necessary for public companies to follow the rules and format set out in the Generally Accepted Accounting Principles (GAAP) when creating financial statements?

• A) It ensures that the market value of assets and debt are reported accurately.
• B) It ensures that information on the performance of public companies is reported on cash-basis accounting.
• C) It ensures that important budgetary information is not omitted.
• D) It makes it easier to compare the financial results of different firms.

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Definitions:

Absorption Costing

A method of inventory costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Direct Materials Costs

Costs directly traceable to the production of a product, including raw materials and component parts.

Direct Conversion

The process of changing one form of energy, material, or resource directly into another without intermediate stages.