ABM2240-Ch4 Accrual Accounting Concepts

This basis is in accord with generally accepted accounting principles.

Companies record revenue only when they receive cash, and record expense only when they pay out cash

Companies recognize revenue in the period in which the performance obligation is satisfied.

Companies record events that change their financial statements in the period in which events occur, even if cash was not exchanged.

The economic life of a business can be divided into artificial time periods.

The fiscal year should correspond with the calendar year.

Companies should match expenses with revenues.

Companies should recognize revenue in the accounting period in which it is earned.

balance sheet and income statement accounts have correct balances at the end of an accounting period.

All of the above.

revenues are recognized in the period in which the performance obligation is satisfied.

expenses are recognized in the period in which they are incurred.

Unearned revenues

Prepaid expenses

Accrued expenses

Accrued revenues

An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made.

The adjusted trial balance provides the primary basis for the preparation of financial statements.

The adjusted trial balance lists the account balances segregated by assets and liabilities.

The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.