A Company That Uses Accounting Methods in Preparing Its Tax

question 30

Multiple Choice

A company that uses accounting methods in preparing its tax returns that differ from the accounting methods used to prepare its financial statements is

• A)in violation of the consistency principle
• B)not necessarily violating either the income tax laws or generally accepted accounting principles
• C)probably guilty of tax evasion
• D)in violation of the relevance assumption

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Definitions:

Average Revenue

The amount of income generated per unit of output, calculated by dividing total revenue by the number of units sold.

Average Total Costs

The total costs of production (fixed and variable costs) divided by the number of units produced, showing the cost per unit.

Pure Monopoly

A market structure in which a single seller controls the entire supply of a product or service, and therefore can manipulate prices and conditions of sale.

Close Substitutes

Products or services that are so similar that a consumer can easily replace one with another, often affecting consumer choice and market competition.