The Reliability Principle States That Assets and Services Should Be

question 128

True/False

The reliability principle states that assets and services should be recorded at their actual cost,since cost is a reliable measure to use in financial accounting.

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Definitions:

Variable Cost

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Contribution Margin Ratio

The proportion of sales revenue that remains after variable production costs are deducted, indicating the profitability of specific products.

Monthly Sales

represent the total revenue or units sold within a month.