Which of the following expenses must be incurred before they can be expensed under GAAP?

The correct answer is organization costs because, under Generally Accepted Accounting Principles (GAAP), these costs are typically treated as capital expenditures. This means that they must be incurred first, and then they are usually amortized over a specific period instead of being immediately expensed. Organization costs are related to the formation of a corporation, such as legal fees, registration fees, and state incorporation fees.

On the other hand, start-up costs may include a broader range of expenditures and, while they can also be capitalized, they are often expensed as incurred under certain conditions. Operating costs represent the day-to-day expenses necessary for running a business and are generally expensed in the period they occur. Research and development costs are often expensed as incurred under GAAP, unless they relate to software development for sale, in which case they may be capitalized after certain criteria are met. Understanding the nuances of these categories is crucial for correct financial reporting in compliance with GAAP standards.