Chapter 3

Question 1

revenues

Answer 1

increases in assets or settlements of liabilities from ongoing operations

Question 2

expenses

Answer 2

decreases in assets or increases in liabilities from ongoing operations

Question 3

gains

Answer 3

increases in assets or settlements of liabilities from peripheral transactions

Question 4

losses

Answer 4

decreases in assets or increases in liabilities from peripheral transactions

Question 5

cash basis accounting

Answer 5

revenue recorded when cash is received; expenses recorded when cash is paid

Question 6

accrual accounting

Answer 6

assets, liabilities, revenues and expenses should be recognized when the transaction that causes them occurs (not necessarily when cash is paid/received)

Question 7

revenue recognition principle

Answer 7

if cash is received before the company delivers goods or services, the liability account unearned revenue is recorded; if cash is received after, the asset accounts receivable is recorded