Which of the Following Statements About Changes in the Way

question 3

Multiple Choice

Which of the following statements about changes in the way advertising agencies are being compensated is true?

• A) Many agencies and their clients have developed some type of fee arrangement or cost-plus agreement for agency compensation.
• B) With the move toward integrated marketing services, it is likely that there will be a return to the commission system of compensation.
• C) From the viewpoints of both the client and the agency, the traditional commission system is much superior to negotiated commissions.
• D) Since most clients want their agencies to be in total charge of the integrated marketing communications process, they are willing to compensate them based on media commissions.

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Definitions:

Expense Accounts

Accounts in the general ledger that are used to record various costs and expenses incurred by a business.

Revenue Accounts

Accounts that track the income a business receives from its various activities, such as sales of products or services.

Loss Accounts

Accounts used to record the loss in value of assets or to represent expenses that reduce net income.

Revenue Recognition

The accounting principle that determines the specific conditions under which revenue is recognized or accounted for.