Which accounting method is used for external reporting?
A) variable costing
B) absorption costing
C) transfer price costing
D) responsibility costing

Question

Quizplus · Accepted Answer

Absorption costing is the accounting method used for external reporting as it complies with Generally Accepted Accounting Principles (GAAP) and provides a more accurate representation of the cost of goods sold and the net income. Variable costing is not accepted for external reporting as it fails to include fixed manufacturing costs in the cost of goods sold calculation. Transfer price costing and responsibility costing are not accounting methods used for external reporting, but rather for internal management purposes.

Which Accounting Method Is Used for External Reporting