A Change in Accounting Policy Should

question 14

Multiple Choice

A change in accounting policy should

• A)be based on changes in the underlying economics of business transactions.
• B)not be based on management's best discretion.
• C)be based on improving the comparability of financial reporting.
• D)not be based on changes to accounting standards.

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Definitions:

Inventory Valuation Method

Techniques used to assess the cost of a company's inventory which can include FIFO (First-In-First-Out), LIFO (Last-In-First-Out), and weighted average methods.

Cost Control

The process of monitoring and regulating the expenses of a business to adhere to budgets and optimize profitability.

Standard Costs

Estimated expenses for materials, labor, and overhead that a company aims to achieve for its products or services.

Weighted Average Costing

A method of calculating the cost of inventory based on the average cost of all similar items in stock, weighted by the quantities of each item.