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Chapter 1: Q2TI-2 (page 1)

Question: Match the accounting terminology to the definitions. 3. Time period concept 4. Revenue recognition principle 5. Matching principle a. Requires companies to record revenue when it satisfies each performance obligation. b. Assumes that a business’s activities can be sliced into small time segments and that financial statements can be prepared for specific periods. c. Guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period, and matches those expenses against the revenues of the period

Short Answer

Expert verified

Answer

The correct option is ‘a’.

Step by step solution

01

Explanation on Accounting Principles

Accounting principles refers basic rules and assumptions that are used in the accounting of the business entity.

02

Explanation on Revenue Recognition Principle

As per the revenue recognition principle, revenue should be recorded by the business, when it satisfies the related obligations to the buyer. Revenue will be recorded when goods or services are finally provided to the customers.

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Most popular questions from this chapter

Identifying accounts on the financial statements Consider the following accounts: a. Accounts Payable b. Cash c. Common Stock d. Accounts Receivable e. Rent Expense f. Service Revenue g. Office Supplies h. Dividends i. Land j. Salaries Expense Identify the financial statement (or statements) that each account would appear on. Use I for Income Statement, RE for Statement of Retained Earnings, B for Balance Sheet, and C for Statement of Cash Flows.

Michael McNamee is the proprietor of a property management company,Apartment Exchange, near the campus of Pensacola State College. The business has cash of \(8,000 and furniture that cost \)9,000 and has a marketvalue of \(13,000. The business debts include accounts payable of \)6,000. Michael's personal home is valued at \(400,000, and his personal bank accounthas a balance of \)1,200. Consider the accounting principles and assumptionsdiscussed in the chapter, and identify the principle or assumption that best matches the situation:

a. Michael's personal assets are not recorded on the Apartment Exchange's

balance sheet.

b. The Apartment Exchange records furniture at its cost of \(9,000, not its market

value of \)13,000.

c. The Apartment Exchange reports its financial statements in U.S. dollars.

d. Michael expects the Apartment Exchange to remain in operation for the

foreseeable future

Explain the purpose of Generally Accepted Accounting Principles (GAAP), including the organization currently responsible for the creation and governance of these standards

Question:Blanchette Plant Service completed a special landscaping job for Kerry Company. Blanchette uses ABC and has the following predetermined overhead allocation rates:

Activity Predetermined

Allocation Base Overhead Allocation Rate

Designing Number of designs \( 290 per design

Planting Number of plants \) 20 per plant

The Kerry job included \(750 in plants; \)1,300 in direct labor; one design; and 30 plants.

Requirements

2. If Kerry paid $3,540 for the job, what is the operating income or loss?

Compute the missing amount in the accounting equation for each entity from the financial information presented:

Assets Liabilities Equity

Hair Styles \( ? \) 36,000 $ 36,000

Style Cuts 90,000 ? 48,000

Your Basket 101,000 68,000 ?

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