Current GAAP Defines Three Types of Changes

question 92

Essay

Current GAAP defines three types of changes:
a.Changes in accounting principle
b.Changes in accounting estimate
c.Changes in reporting entity
Define each item, give an example, and describe how it should be accounted for.

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Definitions:

Pure Competition

A theoretical market structure with a large number of sellers and buyers, identical products, and no barriers to market entry or exit, promoting efficient pricing.

Minimum

The lowest allowable or possible amount, level, or number in a given set of circumstances.

Allocative Efficiency

Refers to a state in which resources are distributed in a way that maximizes the net benefit to society, ensuring that goods and services are produced at the right quantities to meet consumer preferences.

Long-run Equilibrium

A state in which all factors of production are optimally distributed meeting the demands of consumers; also, a point where economic forces such as supply and demand are balanced.