ACCT200 Chapter Notes - Chapter 2: Cash Flow Statement, Retained Earnings, Cash Flow

51 views16 pages

taupelion650

19 May 2016

School

University of Delaware

Department

Accounting

Course

ACCT200

Professor

Debessay Araya

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Accrual accounting attempts to record the effects of accounting events in the period when such events occur, regardless of when cash is received or paid. The goal is to match expenses with the revenues that they produce. Recognition is the act of recording an event in the financial statements. When accruals are used, events are recognized before the associated cash is paid or collected. Deferral is the recognition of revenue or expenses in a period after the cash consequences are realized, i. e. , cash is collected in advance of performing the service. If cash is collected in advance for services, the revenue is recognized when the services are rendered. An asset source transaction increases assets and increases either liabilities or equity. The issue of common stock, which is capital acquired from owners, increases business assets (usually cash) and equity (common stock).

Related Questions

Expenses are recorded when

a. cash is paid for services rendered

b. assets are used in the process of earning revenue

c. a bill is received in advance of services rendered

d. none of these

azurecod500

questions:

1. Generally, revenue from sales should be recognized at a pointwhen

Answer

management decides it is appropriate to do so.

the product is available for sale to the ultimate consumer.

the entire amount receivable has been collected from thecustomer and there remains no further warranty liability.

none of these.

2. What is the general approach as to when product costs arerecognized as expenses?

Answer

In the period when the expenses are paid.

In the period when the expenses are incurred.

In the period when the vendor invoice is received.

In the period when the related revenue is recognized.

3. Recognition of expense related to amortization of anintangible asset illustrates which principle of accounting?

Answer

Expense recognition.

Full disclosure.

Revenue recognition.

Historical cost.

4. Which accounting assumption or principle is being violated ifa company is a party to major litigation that it may lose anddecides not to include the information in the financial statementsbecause it may have a negative impact on the company's stockprice?

Answer

Full disclosure.

Going concern.

Historical cost.

Expense recognition.

5. Where is materiality not used in providingfinancial information?

Answer

Applying the revenue recognition principle.

Determining what items to include in the financialstatements.

Applying the going concern assumption.

Determining the level of disclosure.

apricotcrocodile918

1. Undercash-basis accounting, when is revenue recorded? When is itrecorded under accrual-basis accounting?

2. Under accrualaccounting, when is revenue considered earned?

3. If amembership represents an advance payment for services provided,when is it recognized as revenue under the accrual basis, and whatis it called?

4. Why isinsurance expense spread over multiple periods even though thepolicy coverage is paid in advance?

5. At the end ofthe month for Silverâs Gym, what entries need to be made under thecash basis of accounting for wages that have not yet been paid?What entries need to be made under the accrual method?

6. Why is itimportant to match expenses and revenues to reflect the performanceof a business over a particular time period?

7. When mightthe use of cash basis accounting overstate the actual profitsearned by Silverâs gym? When might it understate the actual profitsearned?

8. Which basisof accounting is in accordance with GAAP for large companies?

puceeagle823

ACCT200 Chapter Notes - Chapter 2: Cash Flow Statement, Retained Earnings, Cash Flow

Document Summary

Get access

Related Documents

ACCT200 Lecture Notes - Lecture 2: Video Lesson, Retained Earnings, Financial Statement

ACCT200 Lecture Notes - Lecture 1: Financial Accounting Standards Board, Video Lesson, Financial Statement

ACCT200 Chapter Notes - Chapter 3: Perpetual Inventory, Cash Flow, Income Statement

Related Questions