What Is a Normative Statement? Give an Example

question 401

Essay

What is a normative statement? Give an example.

Understand the concepts of depreciation and amortization and how they affect financial statements.

Calculate and record adjustments for prepaid and accrued expenses.

Calculate and record adjustments for unearned and accrued revenues.

Apply the matching principle by ensuring expenses and revenues are recorded in the period they are incurred or earned, regardless of the timing of cash transactions.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities.

Sales

The activities involved in selling products or services, or the total amount of goods or services sold.

Decentralization

The delegation of decision-making authority throughout an organization by providing managers with the authority to make decisions relating to their area of responsibility.

Added Decision-Making Authority

Refers to the increase in power or responsibility given to an individual or group to make decisions affecting organizational activities or processes.