Match the following definitions to the correct term: The concept that revenue sh

Question

Match the following definitions to the correct term: The concept that revenue should be recorded when earned, not necessarily when payment is received I Choose l A liability account indicating customers haveChoose already paid for services not yet rendered. A ratio that indicates the percent of each revenue dollar that is left over after covering costs and expenses Choose . The concept that expenses should be reported at the same time as the related l Choose ] Reporting expenses and revenues accordingChoose l to the time the money is paid or received An indication that a company has already paid a cost not yet incurred Prepaid Expense A list of account balances when the accounts do not yet include all revenues and expenses I Choose ] Revenues should be recorded when they are I Choose l earned and expenses when they are incurred Previous Next . 20 FS F6 F7 F8 F9

Explanation / Answer

1) Solution: Revenue recognition principle (Accrual accounting)

Explanation: Revenues should be recognized when earned, and not necessarily when payment is received.

2) Solution: Unearned revenue

Explanation: Unearned revenue is the liability account that reflects the amounts received in advance for providing goods or services

3) Solution: Net profit margin

Explanation: Net profit margin indicates the percent of each revenue dollar that is remained over after covering costs and expenditure

4) Solution: Expense recognition (matching) principle

Explanation: Expense recognition (matching) principle states that expenses must be reported at the same time as the related revenue

5) Solution: Cash basis

Explanation: Under Cash basis revenues and expenses are recorded when they are incurred

6) Solution: Prepaid expense

Explanation: Prepaid expenses are future expenditure that is paid in advance.

7) Solution: Unadjusted trial balance

Explanation: The unadjusted trial balance is a list of ledger accounts before the adjusting entries preparation.

8) Solution: Accrual accounting

Explanation: In accrual accounting, revenues needs to be recognized when they are earned and expenses when they are accrued

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