Which ONE of the Following Statements Is True About Amortisation

question 61

Multiple Choice

Which ONE of the following statements is true about amortisation?

• A) Amortisation refers to the way the borrowed amount (principal) is paid down over the life of the loan.
• B) With an amortised loan, each loan payment contains some payment of principal and an interest payment.
• C) A loan amortisation schedule is just a table that shows the loan balance at the beginning and end of each period, the payment made during that period, and how much of that payment represents interest and how much represents repayment of principal.
• D) All of the above are true.

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Definitions:

Absorption Costing

A method of accounting that encompasses all costs associated with manufacturing, including direct materials, direct labor, as well as both variable and fixed overhead expenses, as part of a product's cost.

Fixed Costs

Regularly occurring costs that remain constant in total, irrespective of changes in operational levels or volume of output.

Variable Costs

Costs that change in direct proportion with the level of output or activity of a business.

Underapplied Overhead

occurs when the allocated manufacturing overhead cost is less than the actual overhead incurred, leading to a discrepancy.