Accounting Choices Made by Management Are Affected by Three Factors

question 72

Essay

Accounting choices made by management are affected by three factors: facts, objectives and constraints.Explain briefly what order management considers these three factors and how an accounting choice problem, such as when to recognize revenue, would be made using them.

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Definitions:

Master Budget

A comprehensive financial planning document that includes all of the subsidiary budgets within an organization, projecting its financial activities for the period.

Raw Materials Production Needs

The quantity and type of raw materials required to meet production schedules for finished goods.

Finished Goods

Products that have completed the manufacturing process but have not yet been sold or distributed to the end consumer.

Raw Materials Cost

The expense associated with the raw materials consumed in producing a finished product.