The Assumption That Deals with When to Recognize the Costs

question 14

Multiple Choice

The assumption that deals with when to recognize the costs that are associated with the revenue that is being recognized is:

• A) matching
• B) going concern
• C) consistency
• D) materiality
• E) none of the answers are correct

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Definitions:

Quality Of Income Ratio

A ratio that indicates the proportion of income that has been realized in cash and thus gives an idea of the company's cash flow condition.

Accrual Of Revenue

The recognition of income by a business at the time the revenue is earned, not necessarily when cash is received.

Cash Dividend

A payment made by a company out of its profits to shareholders in the form of cash.

Indirect Method

A way of calculating cash flows from operating activities in the statement of cash flows, where net income is adjusted for changes in balance sheet items that affect cash.