U4, AOS 1 - Accrued Revenue Flashcards
What is accrued revenue?
Revenue that has been earned but not yet received in cash.
True or False: Accrued revenue is recorded when payment is received.
False.
Fill in the blank: Accrued revenue is recognized in the accounting period when it is __________.
earned.
What is the purpose of recognizing accrued revenue?
To match income with the expenses incurred during the same period.
Which of the following is an example of accrued revenue? A) Cash sale, B) Services performed but not yet billed, C) Inventory sale.
B) Services performed but not yet billed.
True or False: Accrued revenue appears on the balance sheet as an asset.
True.
What type of account is typically used to record accrued revenue?
A receivable account.
Multiple choice: Which of the following statements is true about accrued revenue? A) It is always collected within 30 days, B) It is recorded before cash is received, C) It does not affect financial statements.
B) It is recorded before cash is received.
Short answer: How does accrued revenue affect net income?
It increases net income as it is recognized in the period earned.
Fill in the blank: Accrued revenue is recorded at the end of the __________.
accounting period.
True or False: Accrued revenue can be reversed in the next accounting period if not received.
True.
What is the journal entry to record accrued revenue?
Debit Accounts Receivable and Credit Revenue.
Multiple choice: Accrued revenue is typically associated with which type of business? A) Retail, B) Service, C) Manufacturing.
B) Service.
Short answer: Why is accrued revenue important for financial reporting?
It provides a more accurate picture of a company’s financial performance.
What happens to accrued revenue when cash is received?
The receivable is cleared, and cash is recorded.
True or False: Accrued revenue will decrease total liabilities.
True.
Fill in the blank: Companies use __________ accounting to recognize accrued revenue.
accrual.
What is a common industry that frequently uses accrued revenue?
Consulting firms.
Short answer: Define the term ‘matching principle’ as it relates to accrued revenue.
The accounting principle that expenses should be matched with revenues in the period they occur.
