Question

In week 5, Scott was unsure why he needs to prepare financial statements in accordance with GAAP, can you help him?

A) A: Legal requirement, B: Uniformity; C: Ignoring guidelines, D: Flexibility
B) A: Flexibility, B: Ignoring guidelines; C: Legal requirement, D: Uniformity
C) A: Ignoring guidelines, B: Legal requirement; C: Uniformity, D: Flexibility
D) A: Uniformity, B: Flexibility; C: Ignoring guidelines, D: Legal requirement

Answer 1

Scott needs to prepare financial statements in accordance with GAAP because it is a legal requirement and ensures uniformity.

Step-by-step explanation:

The answer is B) A: Flexibility, B: Ignoring guidelines; C: Legal requirement, D: Uniformity.

Scott needs to prepare financial statements in accordance with Generally Accepted Accounting Principles (GAAP) because it is a legal requirement. GAAP is a set of accounting standards and guidelines that companies must follow when preparing financial statements to ensure their accuracy and transparency. By following GAAP, companies provide stakeholders with reliable and comparable financial information.

Additionally, preparing financial statements in accordance with GAAP ensures uniformity across different companies and industries. This allows investors, creditors, and other users of financial statements to make meaningful comparisons between different businesses.