An Accounting Identity

question 98

Multiple Choice

An accounting identity

• A) ensures that all balances will be in equilibrium.
• B) is useless in analyzing balance of payments since one cannot tell from the identity whether an equilibrium exists or not.
• C) ensures a balance but does not ensure an equilibrium.
• D) applies only to plans of economic agents and not to their actual actions.

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Definitions:

Departmental Overhead Rate Method

A costing method that calculates different overhead rates for each department within a factory, based on each department's specific operational costs.

Overhead Rate

A calculation used to allocate indirect costs to produced goods based on a certain measure, like labor hours or machine hours.

Allocation Base

A criterion or standard used to distribute costs among different cost objects, such as departments or products.

Overhead Costs

Indirect costs incurred in the business process, such as rent, utilities, and administrative expenses, not directly attributable to specific products or services.