Chapter 4 accounting definitions

Question 1

recognizes events in the accounting period which the performance obligation is satisfied

Answer 1

Revenue Recognition Principle

Question 2

aka matching principle. It dictates that efforts (expenses) be matched with results (revenues).

Answer 2

expense recognition principle

Question 3

means that transactions that change a company’s financial statements are recorded in the periods in which the events occur, even if cash was not exchanged

Answer 3

Accrual-basis accounting

Question 4

Accounting basis in which a company records revenue only when it receives cash and expense only when it pays cash

Answer 4

cash-basis accounting

Question 5

entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.

Answer 5

Adjusting Entries

Question 6

1. Prepaid Expenses : expenses paid in cash before they are used or consumed
2. Unearned revenues: cash received before services performed

Answer 6

Deferrals

Question 7

1. Accrued expenses: Revenues for services performed but not yet received in cash or recorded
2. expenses incurred but not yet paid in cash or recorded

Answer 7

Accruals