22 Questions
Which method of measuring income recognizes revenue when a company receives cash and expenses when it pays cash?
Cash basis
What is the increase in net assets from the sale of goods and services called?
Revenue
What is the excess of revenues over expenses called?
Income
Which of the following is a requirement for revenue recognition under the accrual basis?
The customer must have accepted the goods and services
What is the purpose of the matching method in recognizing revenues?
To record expenses in the same time period as the related revenues
What is the net income on an income statement?
The remainder after deducting all expenses from revenues
What causes a decrease in the Retained Earnings account?
Cash dividends
Which of the following is a characteristic of the accrual basis of measuring income?
Expenses are recorded as they are incurred
What is the purpose of preparing financial statements for interim periods?
To provide information about the business at the end of each quarter
What is the term used to describe the increase in net assets from the sale of goods and services?
Revenue
Which of the following is true about expenses?
They result from consuming or giving up resources
What is the term used to describe the original acquisition cost of the inventory that a company sells to customers during the reporting period?
Cost of goods sold
What is the term used to describe the total cumulative owners' equity generated by income?
Retained earnings
What percentage of publicly traded US companies use the fiscal year to measure income?
35%
Which of the following is NOT a requirement for revenue recognition under the accrual basis?
The company has a positive net income
Which of the following expenses are NOT linked to revenues?
Rent
Which financial statement shows all changes during the year in each stockholder's equity account?
Statement of Stockholder's Equity
What is the bottom line on an income statement called?
Net income
What is the distribution of cash to stockholders called?
Cash dividends
What is the term used for the increase in net assets from the sale of goods and services?
Net income
What causes a decrease in the Retained Earnings account?
Cash dividends
What are changes in stockholders' equity that do not result from net income or transactions with shareholders called?
Other Comprehensive Income
Test your knowledge on revenues and expenses in the context of interim financial statements. Learn about how companies measure income, define the fiscal year, and prepare financial statements for interim periods.
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