GAAP-based income statements categorize expenses based on
A)business function.
B)cost behavior.
C)dollar amount.
D)contribution margin.

Question

GAAP-based income statements categorize expenses based on 
A)business function.
B)cost behavior.
C)dollar amount.
D)contribution margin.

Quizplus · Accepted Answer

GAAP-based income statements categorize expenses based on business function, such as cost of goods sold, selling and administrative expenses, and research and development expenses. This helps users of the financial statements understand how the company is generating revenue and in which areas it is investing its resources. Choice B is incorrect because cost behavior is not used to categorize expenses on GAAP-based income statements. Choice C is incorrect because dollar amount alone is not sufficient to categorize expenses in a meaningful way. Choice D is incorrect because contribution margin is a measure of profitability, not a method of categorizing expenses.

GAAP-Based Income Statements Categorize Expenses Based on