Which type of costing system is required for external financial reporting?
A)Prime costing
B)Out-of-pocket costing
C)Absorption costing
D)Variable costing

Question

Quizplus · Accepted Answer

Absorption costing is required for external financial reporting as it complies with Generally Accepted Accounting Principles (GAAP). It includes all costs, whether variable or fixed, as a part of the cost of goods sold and the inventory valuation. Prime costing and out-of-pocket costing are not recognized costing methods, and variable costing is not allowed for external financial reporting as it violates GAAP.

Which Type of Costing System Is Required for External Financial