Firms must prepare income statements and balance sheets in accordance with Generally Accepted Accounting Principles which requires firms to use:
A)Variable costing.
B)Absorption costing.
C)Cost-based reporting.
D)Variance analysis.
E)None of the above.

Question

Quizplus · Accepted Answer

Generally Accepted Accounting Principles require firms to use absorption costing for preparing income statements and balance sheets, which includes all costs (both fixed and variable) associated with producing goods or services. This method is considered more accurate and reliable than variable costing, which only includes variable costs in income statements. Cost-based reporting and variance analysis are not methods used for preparing income statements and balance sheets.

Firms Must Prepare Income Statements and Balance Sheets in Accordance