When Does a Company Account for Revenue If It Uses

question 132

Multiple Choice

When does a company account for revenue if it uses cash basis accounting?

• A) when services are performed, even though cash may be received at a later date
• B) before services are performed
• C) when the services are being performed
• D) when cash is received, either prior to, at the time of, or after the services are performed

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Definitions:

Direct Labour-Hours

A measure of the amount of time workers spend directly manufacturing a product or providing a service.

Traditional Costing System

A traditional costing system allocates factory overhead to products based on volume-related measures such as direct labor hours or machine hours.

Overhead Cost Per Unit

This is the amount of indirect costs allocated to each unit of production, including costs not directly tied to the production like rent and utilities.

Activity-Based Costing

A costing methodology that assigns costs to products based on the activities required to produce them, aiming to provide more accurate product costing.