Reference no: EM132461993

In preparing an Income Statement, revenues and costs must be tracked. Revenue is fairly straightforward. What amounts should be recorded as costs depends on many variables, including for whom the income statement is prepared. A GAAP income statement used what is called "normal historical" costing. In contrast, an income statement prepared for internal analysis by the company might use standard costs, trying to determine what income should be. The MAAW addresses three alternative "bases" for tracking costs - pure historical, normal historical, and standard costs.

Question 1: Describe how each one works, pointing out its advantages, shortcomings, and differences from the other methods.