The Accounting Principle That Requires That the Cost Flow Method

question 161

Multiple Choice

The accounting principle that requires that the cost flow method be consistent with the physical movement of goods is

• A) called the expense recognition principle.
• B) called the consistency principle.
• C) nonexistent; that is, there is no accounting requirement.
• D) called the physical flow assumption.

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Definitions:

Projected Cash Flows

Estimates of the amount of money expected to be received and paid out by a business over a future period.

Capital Rationing

A strategy or situation where a company limits its new investments or projects due to constraints in available capital.

NPV

Net Present Value; a calculation used to estimate the value of an investment, considering the present value of its future cash flows.

Option To Wait

The choice to delay an investment or decision, which might carry value by allowing more information to be gathered, potentially leading to a better informed decision.