Under the Accrual Basis of Accounting

question 90

Multiple Choice

Under the accrual basis of accounting:

• A)cash must be received before revenue is recognized.
• B)net income is calculated by matching cash outflows against cash inflows.
• C)events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
• D)the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

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Definitions:

Bonus Contracts

Agreements that specify the conditions under which bonuses will be awarded to employees or partners, often tied to performance metrics.

LIFO Conformity Rule

A requirement that if the Last-In, First-Out (LIFO) inventory valuation method is used for tax purposes, it must also be used for financial reporting.

SEC

Securities and Exchange Commission, an independent federal agency responsible for enforcing federal securities laws and regulating the securities industry and stock and options exchanges in the United States.

International Accounting Standards

A set of older accounting standards that were replaced by IFRS, previously developed by the International Accounting Standards Committee (IASC) to guide financial reporting internationally.