Comparison of Individual Customer Balances with Previous Years Will Detect

question 56

Multiple Choice

Comparison of individual customer balances with previous years will detect what type of possible misstatement?

• A)misstatement in gross profit and bad debt expense
• B)overstatement or understatement of bad debt expense
• C)overstatement or understatement of allowance for uncollectible accounts
• D)misstatements in accounts receivable and related income statement accounts

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Definitions:

Unit Variable Expenses

Costs that vary directly with the volume of production or sales per unit.

Fixed Expenses

Costs that do not change with the level of production or sales volume, such as rent and salaries.

Variable Expenses

Expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.

Net Income

The profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.