Describe the Two-Step Process by Which Costs Are Allocated in an ABC

question 165

Essay

Describe the two-step process by which costs are allocated in an ABC system.

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Definitions:

Necessary Expense

An expense that is considered essential for the generation of income or for maintaining a living condition, often considered for tax deductions.

Taxpayer's Business

This term generally refers to any business activity or venture that is conducted with the aim of generating income or profit taxable to the individual or entity undertaking the activity.

Cash-Basis Taxpayer

An individual or entity that reports income and deductions in the year that cash is received or paid, respectively.

Account Receivable

Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.