ACG 2021- Exam 2 Questions and 100% Correct Answers
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Course
ACG 2021
Institution
ACG 2021
Expense Recognition Principle match expenses with revenues in the period when the company makes efforts to generate those revenues
Periodicity Assumption economic life of businesses can be divided into artificial time periods
Revenue and Expense in accordance with generally accepted accounting pr...
ACG 2021- Exam 2 Questions and 100%
Correct Answers
Expense Recognition Principle ✅match expenses with revenues in the period when
the company makes efforts to generate those revenues
Periodicity Assumption ✅economic life of businesses can be divided into artificial time
periods
Revenue and Expense ✅in accordance with generally accepted accounting principles
Revenue Recognition Principle ✅revenue organized in the accounting period in which
the performance obligation is satisfied
Accrual-Basis Accounting ✅-transactions recorded in the periods in which the events
occur
-revenues are recognized when services are performed even if cash was not received
-expenses are recognized when incurred even if cash was not paid
Cash-Basis Accounting ✅-revenues are recognized only when cash is received
-expenses are recognized only when cash is paid
-prohibited under GAAP
The two types Deferrals are: ✅1. Prepaid Expenses
2. Unearned Revenues
The two types of Accruals are: ✅1. Accrued Revenues
2. Accrued Expenses
Prepaid Expenses ✅expenses paid in cash and recorded as assets before they are
used or consumed
Unearned Revenues ✅cash received before service are performed
Accrued Revenues ✅revenues for services performed but not yet received in cash or
recorded
Accrued Expenses ✅expenses incurred but not yet paid in cash or recorded
Cost of Goods Sold is: ✅the total cost pf merchandise sold during the period
, Two Types of Operating Cycles: ✅1. service company
2. merchandising company
Order of a Service Company: ✅cash->perform service->accounts receivable->mail-
>receive cash
Order of a Merchandising Company ✅cash->buy inventory->inventory->sell inventory-
>accounts receivable->mail->receive cash
Periodic System ✅-do not keep detailed records of the goods on hand
-cost of goods sold determined by count at the end of the accounting period
Perpetual System ✅-maintain detailed records of the cost of each inventory purchase
and sale
-records continuously show inventory that should be on hand for every item
-company determines cost of goods sold each time a sale occurs
In the FOB Shipping point, who pays for the freight cost? ✅buyer pays freight costs
In the FOB destination, who pays for the freight cost? ✅seller pays freight costs
FOB shipping point ✅ownership of the goods passes to the buyer when the public
carrier accepts the goods form the seller
FOB destination ✅ownership of the goods remains with the seller until the goods reach
the buyer
2/10, n/30 ✅2% discount if paid within 10 days otherwise the net amount due within 30
days
1/10 EOM ✅1% discount if paid within first 10 days of next month
n/10 EOM ✅net amount due within the first 10 days of the next month
Single-step income statement ✅subtract total expenses from total revenues
Multiple-step income statement ✅highlights the components of net income
Two reasons for using the single step format: ✅1. company does not realize any type
of profit or income until total revenues exceed total expenses
2. form is simple and easy to read
Three important line items of multiple step income statement: ✅1. gross profit
2. income from operations
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