The Classification of a Cost as Either Direct or Indirect

question 25

Multiple Choice

The classification of a cost as either direct or indirect depends primarily on:

• A)the computer tracing system within the organisation.
• B)the definition of the cost object.
• C)the knowledge of the accountant.
• D)the type of business.

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Definitions:

Adjusting Entries

Records in finance completed upon the conclusion of an economic term to apportion gains and expenditures to the era in which they authentically occurred.

Accrued Assets

Assets that are recognized on the balance sheet before they have been received or realized, often relating to income not yet received.

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries from the end of the previous period, simplifying the record of new transactions.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances before producing financial statements, necessary for the accrual basis of accounting.