The Major Reason for the Existence of Generally Accepted Accounting

question 50

Multiple Choice

The major reason for the existence of generally accepted accounting principles is to:

• A) limit the amount of professional judgement required by accountants in the preparation of financial reports.
• B) increase business disclosures.
• C) improve the standard of accounting information for decision-making.
• D) make accountants legally accountable for material errors.

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Definitions:

Residual Income

The amount of income that an individual or company retains after accounting for all operating expenses and cost of capital.

Operating Assets

Assets that are used by a company in its daily operations to generate revenue, excluding any investment or non-operational assets.

Net Operating Income

The profit derived from a company's regular business activities, excluding deductions of interest and taxes.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.