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By matching revenues and expenses in the same period in which they incur?
By matching revenues and expenses in the same period in which they incur, net income or loss will be properly reported on the income statement.
Net income will result during a time period when?
revenues exceed expenses.
Why does the direct write-off method of accounting for bad debts usually fail to match revenues and expenses?
Direct write-off normally does not match because the revenue from the sales was reported in an earlier period. It affects the revenues and expenses in the period it is written off in. If a company has many credit sales then it would be better to instead estimate an allowance for uncollectible credit accounts. That way the revenues and expenses are affected in each period and the sales numbers will represent the business' sales more accurately; provided the percentage is watched and adjusted as needed.
How are revenues and expenses reported on the income statement under the accrual basis of accounting?
Revenues are reported on the income statement in the period in which they are earned.
What occurs when expenses exceed revenues for a given accounting period?
Retained earnings are decreased.
What are the five categories of adjusting entries?
deferred expenses, deferred revenues, accrued expenses, accrued revenues and estimated expensesAdjustments to the enterprise's accounts can only be made in the time period when the business terminates.
By matching revenues and expenses in the same period in which they incur?
By matching revenues and expenses in the same period in which they incur, net income or loss will be properly reported on the income statement.
Net income will result during a time period when?
revenues exceed expenses.
What principal allocates expenses to revenues in the proper period?
Matching Principal
What is the importance of the matching principle in accounting and how does it ensure that expenses are properly aligned with the revenues they generate?
The matching principle in accounting is important because it ensures that expenses are recorded in the same period as the revenues they help generate. This principle helps provide a more accurate representation of a company's financial performance by aligning expenses with the revenues they contribute to, giving a clearer picture of profitability.
Is a financial statement that summarizes the revenues and expenses for a specific period of time?
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Why does the direct write-off method of accounting for bad debts usually fail to match revenues and expenses?
Direct write-off normally does not match because the revenue from the sales was reported in an earlier period. It affects the revenues and expenses in the period it is written off in. If a company has many credit sales then it would be better to instead estimate an allowance for uncollectible credit accounts. That way the revenues and expenses are affected in each period and the sales numbers will represent the business' sales more accurately; provided the percentage is watched and adjusted as needed.
How are revenues and expenses reported on the income statement under the accrual basis of accounting?
Revenues are reported on the income statement in the period in which they are earned.
What occurs when expenses exceed revenues for a given accounting period?
Retained earnings are decreased.
What is financial statement that summarizes the revenues and expenses for a specific period of time?
income statement
What to you call the excess of expenses over revenues?
The excess of expenses over revenues is commonly referred to as a "net loss." This occurs when a company's total expenses surpass its total income during a specific period, indicating that it has spent more money than it earned. A net loss can impact a business's financial health and may lead to the need for corrective actions to improve profitability.
What does P and L consist of?
The Profit and Loss statement (P&L) mainly consists of revenues, expenses, and resulting net income or loss for a specific period. Revenues represent the income generated from selling goods or services, while expenses include costs incurred to generate that revenue. The net income is the difference between total revenues and total expenses, indicating the profitability of the business for that period.
