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ACG 2021- Exam 2 Questions and 100% Correct Answers
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  • 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...

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  • August 11, 2024
  • 5
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • acg 2021 exam 2 questions and 100 correct answer
  • expense recognition principle match expenses with
  • periodicity assumption economic life of businesse

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  • ACG 2021
  • ACG 2021

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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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