Which Statement Best Explains the Concept of "Representational Faithfulness

question 32

Multiple Choice

Which statement best explains the concept of "representational faithfulness"?

• A)Transactions should be recorded in accordance with their substance rather than their legal form.
• B)Transactions should be recorded in accordance with their legal form rather than their substance.
• C)Transactions should be recorded accurately and completely to be useful to financial statement users.
• D)Transactions should be recorded using the rules and guidelines provided in the accounting standards.

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Definitions:

Labor Rate Variance

The difference between the actual labor rate paid and the standard labor rate expected, multiplied by the actual hours worked.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, reflecting efficiency in material use.

Variable Overhead Efficiency Variance

The difference between the actual hours taken to produce something and the standard hours expected, multiplied by the variable overhead rate.

Materials Price Variance

The difference between the actual cost of materials and the expected cost multiplied by the quantity of materials used.