Generally Accepted Accounting Principles Require That Certain Lease Agreements Be

question 6

Multiple Choice

Generally accepted accounting principles require that certain lease agreements be accounted for as purchases.The theoretical basis for this treatment is that a lease of this type

• A)Effectively conveys all of the benefits and risks incident to the ownership of property
• B)Is an example of form over substance
• C)Provides the use of the leased asset to the lessee for a limited period of time
• D)Must be recorded in accordance with the concept of cause and effect

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Definitions:

Standard Costing System

An accounting method that assigns predetermined costs to goods and services, used to control costs and measure performance.

Fixed Overhead

Regular, ongoing expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Standard Costing

An accounting method that applies estimated costs to product costs for budgeting purposes and cost control.

Flexible Budget

A budget that adapts or changes based on the fluctuations in a business's activity or volume level.