When Accounts Receivable Increase During the Year, Revenues on an Accrual

question 1

True/False

When accounts receivable increase during the year, revenues on an accrual basis are lower than revenues on a cash basis.

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate years.

Direct Materials Costs

The cost of raw materials directly used in the production of goods, which can be easily traced back to the finished product.

Predetermined Overhead Rate

The rate calculated before the period begins, used to allocate manufacturing overhead costs to individual units of production based on a consistent measure, such as direct labor hours.

Manufacturing Overhead

Indirect factory-related costs that are not directly tied to a specific product, such as maintenance and factory utilities.