The Expense Recognition Principle Requires

question 126

Multiple Choice

The expense recognition principle requires:

• A)that expenses should be recognized on periodic basis.
• B)that expenses should be split between Cost of Goods Sold (sometimes called Cost of Sales)and Selling Expenses.
• C)that current assets and current liabilities are stated in a certain order on the balance sheet.
• D)that costs are recognized as expenses in the same period as the revenues they generate.

Understand the role and accounting for support department costs.

Identify and evaluate the methods for allocating joint costs and their appropriateness given the context.

Understand the importance and methods of allocating support department costs to products.

Distinguish between different methods of support department cost allocation and their accuracy.

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, commonly used in finance to assess the volatility of an investment.

Single-index Model

A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on a broad market index, and firm-specific factors.

Systematic Component

The part of an investment’s return or risk that is attributable to broad market factors affecting all investments to some degree.