The Most Important Test for the Existence/occurrence Objective for Accounts

question 59

Multiple Choice

The most important test for the existence/occurrence objective for accounts receivable is:

• A) existence of the balances confirmed.
• B) collectibility of the balances confirmed.
• C) ownership of the balances confirmed.
• D) internal control over balances confirmed.

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Definitions:

Variable Costing

A method of inventory costing that includes only variable production costs (materials, labor, and variable overhead) in the cost of goods sold, treating fixed overhead as a period expense.

Net Operating Income

The profit a company makes after deducting operating expenses like wages, depreciation, and cost of goods sold, but before interest and taxes.

Operating Loss

A situation where a company's operating expenses exceed its gross profits or revenues, indicating that it is not making money from its core operations.

Year 2

Commonly refers to the second year of operation or existence in various contexts, such as financial reporting or the lifespan of an asset.