Ordinary Shares Represent a Claim on Residual Income

question 8

True/False

Ordinary shares represent a claim on residual income.

---

Definitions:

Direct Method

A cost allocation technique used in cost accounting that assigns all service department costs directly to producing departments without considering any services rendered between service departments.

Accounts Receivable

Debts to a company from its customers for products or services already delivered, yet payment is pending.

Administrative Expenses

Costs related to the general operation of a company, such as salaries of executives and office supplies.

Direct Method

A method of allocating service department costs directly to producing departments without any intermediate allocation steps.