Expense Allocation Methods for CFA® Level 1 Exam Preparation

Not a Theoretical Basis for Expense Allocation

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Question

Which of the following is not a theoretical basis for the allocation of expenses?

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Explanations

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A. B. C. D. E.

A

Profit maximization means that the goal is not to report costs as expenses by hiding them on the balance sheet. It is not an acceptable basis as it goes against the purpose of generally accepted accounting methods which is to fairly present the results of operations and financial position.

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