When Compiling the Financial Statements of a Private Company,an Accountant

question 24

Multiple Choice

When compiling the financial statements of a private company,an accountant should ________.

• A)review agreements with financial institutions for restrictions on cash balances
• B)study and understand the client's business
• C)enquire of key personnel concerning related parties and subsequent events
• D)perform ratio analyses of the financial data of comparable prior periods

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Definitions:

Direct Materials

Direct materials are raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the product's cost.

Direct Labor-Hours

The full sum of time spent by employees directly engaged in the process of creating products.

Variable Overhead

Costs that change with production volume but are not directly tied to specific units, such as utilities for the manufacturing plant.

Direct Materials

Raw materials that are directly traceable and allocable to a finished product in the manufacturing process.