When Applied to Budgets, Responsibility Accounting Provides Feedback to Top

question 14

Essay

When applied to budgets, responsibility accounting provides feedback to top management about the performance of different responsibility-centre managers relative to the budget.Name and briefly describe the three ways, presented in the textbook, that properly used variances can be helpful.

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Definitions:

Income Statement

A financial report summarizing a company’s revenues, expenses, and profits over a specified period, showing the company's financial performance.

Acid-Test Ratio

A financial ratio that measures a company's ability to pay off its current liabilities with its quick assets, indicating short-term financial strength.

Balance Sheet

A financial statement that displays a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial position.

Current Assets

Refers to assets that are expected to be converted into cash or used up within one year or in the operating cycle of the business, whichever is longer.