Podcast
Questions and Answers
Which one of the following statements is true about the fiscal year?
Which one of the following statements is true about the fiscal year?
- The fiscal year is used to measure expenses.
- The fiscal year is the same for all publicly traded US companies.
- Each company has their own way to define the fiscal year. (correct)
- Financial statements are prepared for the fiscal year.
What is the excess of revenues over expenses called?
What is the excess of revenues over expenses called?
- Income (correct)
- Loss
- Profit
- Earnings
When does a company recognize revenue under the accrual basis?
When does a company recognize revenue under the accrual basis?
- When a company receives cash
- When cash changes hands
- When a company incurs expenses
- When a company earns revenue (correct)
What is the decrease in net assets as a result of consuming or giving up resources called?
What is the decrease in net assets as a result of consuming or giving up resources called?
What is the original acquisition cost of the inventory that a company sells to customers called?
What is the original acquisition cost of the inventory that a company sells to customers called?
What is the total cumulative owners' equity generated by income called?
What is the total cumulative owners' equity generated by income called?
What are financial statements prepared for?
What are financial statements prepared for?
Which of the following is a requirement for revenues to be recognized under accrual basis?
Which of the following is a requirement for revenues to be recognized under accrual basis?
When are revenues considered to be 'realized' under accrual basis?
When are revenues considered to be 'realized' under accrual basis?
What is the purpose of the matching method in recognizing revenues?
What is the purpose of the matching method in recognizing revenues?
What types of expenses are linked to revenues?
What types of expenses are linked to revenues?
What types of expenses are not linked to revenues?
What types of expenses are not linked to revenues?
What is the purpose of the Income Statement?
What is the purpose of the Income Statement?
What is the net income on an income statement?
What is the net income on an income statement?
What do we call it when expenses exceed revenues?
What do we call it when expenses exceed revenues?
Flashcards are hidden until you start studying
Study Notes
Fiscal Year and Revenue Recognition
- A fiscal year is a period of time used for budgeting and financial reporting, but no specific information is provided about it.
Accounting Basics
- The excess of revenues over expenses is called net income or profit.
- Revenue is recognized under the accrual basis when it is earned, regardless of when cash is received.
Financial Statements and Expenses
- Financial statements are prepared to provide stakeholders with financial information about a company.
- A requirement for revenues to be recognized under accrual basis is that they are earned, regardless of when cash is received.
Revenue Realization and Matching
- Revenues are considered 'realized' under accrual basis when they are earned, regardless of when cash is received.
- The purpose of the matching method in recognizing revenues is to match costs with revenues in the same period.
Expense Classification
- Expenses linked to revenues are called matching costs, such as cost of goods sold.
- Expenses not linked to revenues are called period costs, such as salaries and rent.
Income Statement
- The purpose of the Income Statement is to report revenues and expenses over a particular period.
- Net income on an income statement represents the excess of revenues over expenses.
- When expenses exceed revenues, it is called a net loss.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
