Ch. 4 - Income Measurement and Accrual Accounting

Question 1

What is accrued revenues?

Answer 1

Accrued revenues appear on the balance sheet when a company has recorded revenue but will only receive cash at a later date

Question 2

What is recognition in terms of accounting?

Answer 2

Recognition is the process of formally recording or incorporating an item into the financial statements of an entity as an asset, a liability, a revenue, an expense, or the like

Question 3

What is the difference on the Cash and Accrual Bases of Accounting?

Answer 3

• In an income statement prepared on a cash basis, revenues are recognized when cash is received
• In an income statement prepared on an accrual basis, revenue is recognized when the company has satisfied its performance obligation.

Question 4

What is depreciation?

Answer 4

The process of allocating the cost of a tangible long-term asset to its useful life

Question 5

What are adjusting entries?

Answer 5

Adjusting entries are the journal entries the accountant makes at the end of a period for a company on the accrual basis of accounting