Multiple Choice
Which one of the following types of accounting would most likely result in the establishment of a contract between two parties?
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1. Introduction to Accounting
Types of Accounting
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A commission or bonus is an example of a form of:
A
Accrual accounting revenue
B
Fixed salary
C
Managerial accounting income
D
Variable compensation
Verified step by step guidance1
Understand the concept of variable compensation: Variable compensation refers to earnings that fluctuate based on performance, such as commissions or bonuses, rather than a fixed salary.
Review the options provided in the problem: Accrual accounting revenue, Fixed salary, Managerial accounting income, and Variable compensation.
Eliminate incorrect options: Accrual accounting revenue relates to recognizing revenue when earned, not compensation. Fixed salary is a predetermined amount paid regularly, which does not vary. Managerial accounting income pertains to internal financial reporting, not employee compensation.
Identify the correct option: Commissions and bonuses are tied to performance and are not fixed amounts, making them examples of variable compensation.
Conclude that the correct answer is Variable compensation, as it aligns with the definition and characteristics of commissions and bonuses.
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