Computing accrual-basis net income


1. The idea that the expenses incurred to generate revenue for a given period should be matched against that revenue is called the:

a. Revenue recognition principle.
b. Realization concept.
c. Time period concept.
d. Matching principle.

2. The process of dividing a company's operations into separate and distinct time periods so that reports can be prepared on a timely basis is the:

a. Fiscal year concept.
b. Revenue recognition principle.
c. Matching concept.
d. Time period concept.

3. During 05, the Latrex Corporation had cash and credit sales of $47,000 and $45,500 respectively. The company also collected accounts receivable of $26,700 and incurred expenses of $68,500, 80 percent of which were paid during the year. In addition, Latrex paid $24,000 for a 12-month building rental, beginning on July 1, 05. Latrex's accrual-basis net income (loss) for 05 was:

a. $12,000.
b. $25,700.
c. $0.
d. $38,700.

4. A revenue that is collected before it has been earned is called a(n):

a. Revenue.
b. Unrecorded revenue.
c. Deferred revenue.
d. Unearned revenue.

5. Expense items that have been incurred during a period but not recorded by the end of the period are:

a. Prepaid liabilities.
b. Prepaid expenses.
c. Deferred expenses.
d. Unrecoreded liabilities.

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Accounting Basics: Computing accrual-basis net income
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