A Small Company May Be Able to Justify Using a Cash-Basis

question 77

Multiple Choice

A small company may be able to justify using a cash-basis of accounting if they have

• A)sales under $1,000,000.
• B)no accountants on staff.
• C)few receivables and payables.
• D)all sales and purchases on account.

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Definitions:

Overhead Application

The process of assigning or allocating overhead costs to produced goods or services, often using a predetermined overhead rate.

Activity-Based Management Method

The activity-based management method is a technique that uses detailed information about activities and their costs to manage and improve business processes.

Support Department Costs

Expenses incurred by the service departments that assist other internal departments rather than directly producing a product or service.

Allocate Overhead Costs

The process of assigning indirect costs to products, services, or business units based on relevant allocation bases.