Exam 3: Operating Decisions and the Accounting System

The revenue principle recognizes revenues when the earnings process is complete or nearly complete,an exchange has taken place,and collection is probable.

Using the accrual basis of accounting,a company recognizes expenses when they are paid.

The statement of changes in equity is dependent on the results of

If total revenues are the same as total expenses,then a company has which of the following?

Transactions where cash is received before being earned often result in adjusting entries at the end of the period to record profit in the proper period.

On January 1,20B,Grover Inc.,started the year with a $22,000 credit balance in its retained earnings account.During 20B,the company earned profit of $40,000 and declared and paid dividends of $10,000.Also,the company received cash of $15,000 as an additional investment by its owners.Therefore,the balance in retained earnings on December 31,20B,would be which of the following?

Hill's Copy Service performed photocopy services during December,20A,but had not collected any cash (or other assets)from its customers by the end of the accounting period,December 31,20A.What effect did performing these services have on the fundamental accounting model?

The matching principle states that expenses should be matched with revenues because

The profit of a business is computed by subtracting revenues from expenses.

Utilities expense and wages payable are both elements of the income statement.

The sale of merchandise on credit and the collection from the customer ten days later constitutes one transaction for accounting purposes.

The following data is from Gauthier Machine Shop: Compute Gauthier Machine Shop's asset turnover ratio for the two most recent years (a)20C __________ (b)20B __________

Usually,the market price of shares is not adversely affected by lower than expected quarterly profit.

Accrual basis accounting records revenues when earned and expenses when incurred,regardless of when the related cash is received or paid.

During 20B,Blue Corporation incurred operating expenses amounting to $100,000,of which $75,000 were paid in cash; the balance will be paid in January 20C.Transaction analysis of operating expenses for 20B,should reflect which of the following?

An increase in revenue represents an increase in shareholders' equity.

The income statement provides investors with information about a company's investing activities.

Operating revenues result from the sale of goods or services.

Which principle holds that all of the expenses incurred in earning revenue should be identified with the revenue recognized and reported for the same period?

Immediately after the adjusting entries were journalized and posted for the 20B year,the accounts of Way Corporation showed the following balances: Give the amount that should be shown in each of the following accounts before any transactions are recorded for the year 20C: