Management Accounting MCQ Questions and Solutions with Explanations | Management

Answer: Option D

When an essential information for calculation of income statement is missing, then costs that can be considered for this purpose is called relevant costs. Relevant cost is a managerial accounting term that describes avoidable costs that are incurred only when making specific business decisions. The concept of relevant cost is used to eliminate unnecessary data that could complicate the decision-making process.

Answer: Option C

In relevance concepts, relevant revenues are also termed as expected future revenues. The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle. They both determine the accounting period in which revenues and expenses are recognized. According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received.

Answer: Option A

First step in decision making process is to identify problem. The first step in making the right decision is recognizing the problem or opportunity and deciding to address it. Determine why this decision will make a difference to your customers or fellow employees.