Discuss Why Activity Flexible Budgeting Provides a More Accurate Prediction

question 95

Essay

Discuss why activity flexible budgeting provides a more accurate prediction of costs than a traditional flexible budget.

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Definitions:

Accrual

The accounting method that recognizes revenues and expenses when they are incurred, regardless of when cash is exchanged.

Unexpired Insurance

The portion of paid insurance premiums that is applicable to future periods, representing coverage that has not yet been used or expired.

Accrued Asset

An asset that represents revenues or incomes that have been earned but not yet received in cash or recorded.

Fiscal Period

A specific time period for which a business conducts financial accounting and reporting, often a year, split into quarters or months.