Which of the Following Analytical Procedures Should Be Applied to the Income

question 47

Multiple Choice

Which of the following analytical procedures should be applied to the income statement?

• A)Ascertain that the net income amount in the statement of cash flow agrees with the net income amount in the income statement.
• B)Select sales and expense items and trace amounts to related supporting documents.
• C)Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.
• D)Obtain from the proper client representatives the beginning and ending inventory amounts that were used to determine costs of sales.

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Definitions:

Budgeted Cash Receipts

Forecasted cash inflows for a certain period, accounting for all expected sources of revenue including sales, investments, and loans.

Budgeted Cash Disbursements

An estimate of all cash payments that a business plans to make over a specific period, including operating expenses and capital expenditures.

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities they require, aiming to more accurately reflect the costs incurred.

Manufacturing Costs

Expenses related to the production of goods, including direct materials, direct labor, and manufacturing overhead.