Multiple Choice
Which of the following best describes the primary difference between financial accounting and managerial accounting?
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1. Introduction to Accounting
Types of Accounting
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A department that is evaluated on its success in generating income is a(n):
A
Cost center
B
Investment center
C
Profit center
D
Revenue center
Verified step by step guidance1
Understand the definitions of the different types of centers: Cost center, Profit center, Investment center, and Revenue center.
A Cost center is responsible for controlling costs and does not generate revenue directly.
A Profit center is evaluated based on its ability to generate profits, which is the difference between revenue and expenses.
An Investment center is evaluated based on its ability to generate profits relative to the assets invested in the center.
A Revenue center is evaluated solely on its ability to generate income or revenue, making it the correct answer in this case.
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