A Pro Forma Statement Uses the Prior Year's Financial Statements

question 39

True/False

A pro forma statement uses the prior year's financial statements to find the relationship or relative percentage of each line (accounting category)to either the sales revenue or the total assets of the firm.

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Definitions:

Fixed Costs

expenses that do not vary with changes in production volume or sales, such as rent, salaries, and insurance.

Standard Cost Accounting System

A system that assigns expected costs to products to estimate selling prices and cost control, allowing variance analysis for actual costs incurred.

Unfavorable Variances

Differences between actual and expected outcomes that negatively affect a business's financial performance.

Favorable Variances

Differences between actual and budgeted financial performance that result in a better-than-expected financial position.