The Activity Index Used in Preparing a Flexible Budget Should

question 37

True/False

The activity index used in preparing a flexible budget should be the basis of the variable costs that are being budgeted.

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Definitions:

Allowance Method

An accounting technique used to manage accounts receivable and bad debts by estimating uncollectible accounts.

GAAP

Generally Accepted Accounting Principles, a set of accounting standards and practices used in the United States to ensure the accuracy and consistency of financial reporting.

Bad Debt Expense

A charge to the income statement that represents the amount of non-collectable accounts receivable that occurs in a given period.

Open Invoice

An invoice that has been issued by a seller to a buyer, but has not yet been paid.