Where There Are Changes in Accounting Policies That Create Initial

question 64

Multiple Choice

Where there are changes in accounting policies that create initial gains or losses on the first adoption of a new accounting rule:

• A) The gains and losses can be included in the period's income statement.
• B) The gains or losses are recorded as assets or liabilities, and are amortised over the specified period.
• C) The gains or losses can be adjusted against closing retained earnings.
• D) The gains or losses can be adjusted against opening retained earnings.
• E) The gains or losses can be adjusted against the 'Reserves' recorded in the Equity section of the balance sheet.

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Definitions:

Administrative Expense

Expenses that are not directly tied to the production of goods or services, including salaries of executive officers, legal and office expenses.

Sales Commissions

Financial compensation paid to sales representatives, usually a percentage of the sales they generate, as an incentive to increase sales performance.

Indirect Labor

Labor costs of employees who support the production process but are not directly involved in the active production of goods or services.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, excluding direct materials and direct labor costs.