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Why should cost be matched with revenues at the end of an accounting period?
You compare income with expenses to see how much profit you have made.
What are unearned revenues?
Unearned revenues -Advance payments for goods or services that a company must provide in a future accounting period
When are revenues reported?
Under the accrual basis of accounting, revenues are reported in the accounting period when the services or goods have been completed. This is answer to question 3 on the Accounting Basics quiz.
A nazard true or false-accrual convention is when the revenue earned for a particular period is added to the expenses involved in making the revenue in that period-accounting?
It is false. The right answer is ,the revenue is matched with expenses involved in making the revenues in that period.\the difference will produce a profit or loss.
What are principles of accounting?
1. Revenue Recognition PrincipleIt dictates that revenue should be recognized in the accounting period in which it is earned.2. Matching Priciple(Expense Recognition)It dictates that expenses be matched with revenues in the period in which efforts are made to generate revenues.3. Full Disclosure PrincipleIt requires that circumstances and events that make a difference to financial statement users be disclosed.4. Cost PrincipleIt dictates that assets be recorded at their cost.
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 does the matching principle require?
The matching principle requires that cost of each fiscal year should be matched with revenue of that fiscal year and no previous or future period cost and revenues can be match in current fiscal year.
The accrual basis of accounting recognizes the impact of transactions on the financial statements in the period when?
revenues are earned and expenses are incurred
How are the revenues and expenses reported on the income statement under the cash basis of accounting?
They are reported in the period in which cash is received or paid
What is the accrual concept of accounting?
The accrual concept concerns the matching of costs and revenues for the reporting period.
What is meant by the Accounting Period Concept?
When accountants prepare financial statements, they assume that the life of the business can be divided into time periods. This is called the accounting period concept. Using this concept, accountants must determine in which period to report the revenues and expenses of the business.
