Question

Generally Accepted Accounting Principles (GAAP) are created by: (Select all that apply)

Select one or more:

A. The Securities and Exchange Commission

B. The Generally Accepted Accounting Principles Task Force

C. The Sarbanes Oxley Act

D. The Financial Accounting Standards Board

E. The Public Company Accounting Oversight Board

Which of the following is included as a component of stockholders' equity?

Select one:

A. Accounts payable

B. Buildings

C. Dividends

D. Prepaid property taxes

E. Retained earnings

As inventory and property plant and equipment on the balance sheet are consumed, they are reflected:

Select one:

A. As a revenue on the income statement

B. As an expense on the income statement

C. As a use of cash on the statement of cash flows

D. On the balance sheet because assets are never consumed

E. Both B and C because the financial statements articulate

Answer 1

1. GAAP - Generally Accepted Accounting Principles

GAAP was created by the Financial Accounting Standards Board (FASB) and American institute of certified public accountant (AICPA) subject to rules and regulations of securities exchange commission in 1973.

By above discussion we can conclude that the answer is option D - Financial Accounting Standards Board.

2. Stock holders equity component in the balance sheet represents the wealth that are available to the shareholders

That component includes :-

A. Common stock

B. Reserves and surplus

Reserves and surplus includes all reserves and retained earnings

By the above discussion we can conclude that the answer is option E - Retained earnings.

3. The assets are consumed in the process of production or process of rendering services

These consumption of assets will be represented as depreciation in balance sheet and also reflects in income statements as expenses.

By above discussion and facts of given case the consumption of inventory and property plant and equipment is reflected as an expense on the income statement.

By above points we can conclude that the answer is option - B. Reflects as an expenses in income statement.

These are all the information required to solve the given question.

I hope, all the above mentioned information and explanations are useful and helpful to you.

Thank you.