What Is the Main Reason That It Is Necessary for Public

question 4

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 is easier to find specific information in such a report if it is laid out in a clear and consistent manner.
• B)It ensures that information on the performance of private companies is readily available to the public.
• C)It ensures that important information is not omitted and superfluous information is not included.
• D)It makes it easier to compare the financial results of different firms.
• E)To make sure they satisfy the auditor.

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Definitions:

Merchandising Income Statement

A financial statement detailing the gross profit, expenses, and net profit or loss of a retail or wholesale business.

Administrative Expenses

Overheads and general expenses related to the day-to-day management and operation of a business, excluding production and direct costs.

Operating Income

The profit realized from a business's core operations, excluding revenue from investments and costs such as interest expenses and taxes.

Cost Of Goods Sold

The specific costs tied to the production of goods sold by a company, which include the cost of materials and labor.