Costs Incurred Because Products or Services Fail to Meet Requirements

question 38

Multiple Choice

Costs incurred because products or services fail to meet requirements after delivery to customers are called

• A)external failure costs.
• B)internal failure costs.
• C)appraisal costs.
• D)prevention costs.

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Definitions:

Prepaid Insurance

Refers to payments made in advance for insurance coverage, recognized as an asset on the balance sheet until the coverage period lapses.

Prepaid Expenses

Expenses paid in advance by a company for goods or services to be received in the future, reported as current assets on the balance sheet.

Adjusting Entry

Journal entries made at the end of an accounting period to update account balances before financial statements are prepared.

Expense Accounts

Accounts used to record expenses in the general ledger, capturing costs associated with operating the business.