The System of Preparing Financial Statements Based on Recognizing Revenues

question 17

Multiple Choice

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

• A) Cash basis accounting.
• B) Revenue recognition accounting.
• C) Current basis accounting.
• D) Accrual basis accounting.
• E) Operating cycle accounting.

---

Definitions:

DL Wage Variance

The difference between the budgeted wage and the actual wage paid to direct labor employees.

DL Efficiency Variance

The difference between the actual hours worked by direct labor to produce goods and the expected (or standard) hours, multiplied by the standard labor rate.

Skilled Engineering Labor

Workforce with specialized technical and engineering skills, vital for designing, implementing, and maintaining complex systems.

Direct Labor Efficiency Variance

A measure that analyses the variance between the actual hours worked and the standard hours set for producing a certain number of units.