GAAP

question 89

Multiple Choice

GAAP

• A) requires that revenue not be recognized until cash is received.
• B) allows revenue to be recognized when a customer makes an order.
• C) provides only general guidance on revenue recognition, compared to the detailed guidance provided by IFRS.
• D) provides the same type of guidance as IFRS for revenue recognition.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales activity, such as rent, salaries, and insurance premiums.

Period Costs

Costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued.

Segmented Income Statements

Financial statements that divide a company's financial performance into segments, such as departments or product lines, to assess each segment's profitability separately.

CM Ratio

The contribution margin ratio, calculated as the contribution margin divided by net sales revenue, indicating the proportion of sales revenue available to cover fixed costs and generate profit.