Week 2 Quiz 4
The accrual basis of accounting means_______________________.
o Sales are recorded as cash is received
o To accumulate over time, based on a natural observable increase
o None of the answers listed defines the meaning of accrual accounting
o Gather together like transactions for more efficient entry to the accounting system
Under accrual basis accounting revenue is not recognized until _________________.
o The product is sold and delivered to the end customer.
o A customer agrees to a price and they shake hands with the sales person
o A customer purchase order is received
o Cash is received
The matching principle states ______________________________.
o All of these answers are correct relating to the matching principle
o Expenses that have not related to any future period should be expensed in the current period
o Expenses that recur should be recorded in a systematic manner
o Expenses associated with revenue creation should be recorded in the same period as the revenue
Adjusting entries apply to ___________________________
o All of these entries
o Unearned revenue
Depreciation is _________________________________________.
o The valuation of assets of a business
o A method to increase an assets book value
o The transfer of an asset’s cost to expense over the expected useful life of the asset
o The opposite of residual value
LIFO vs. FIFO
The controller of Sage hen Enterprises believes that the company should switch from the LIFO method to the FIFO method. The controller’s bonus is based on the next income. It is the controller’s belief that the switch in inventory methods would increase the net income of the company. What are the differences between the LIFO and FIFO methods?