The Basic Purpose of Generally Accepted Accounting Principles Is To

question 39

Multiple Choice

The basic purpose of generally accepted accounting principles is to:

• A)Minimize the possibility of a business becoming insolvent.
• B)Provide a framework for financial reporting that is understood by both the preparers and the users of financial statements.
• C)Ensure that financial statements include the type of information that is best suited to every type of business decision.
• D)Eliminate the need for professional judgment in preparing financial statements.

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Definitions:

Standard Cost System

An accounting system that uses predetermined costs for product costing and decision making, facilitating budgeting and variance analysis.

Standards

Criteria or benchmarks used for measuring performance or quality in various fields, including manufacturing, auditing, and accounting.

Actual Information

Factual data or evidence that is true and accurate, without alteration or distortion.

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used in production and the estimated quantity expected to be used, measured in terms of cost.