The Practice of Recording Economic Activity When It Is Recognized

question 19

Multiple Choice

The practice of recording economic activity when it is recognized rather than waiting until it is realized is called:

• A)GAAP accounting
• B)accrual accounting
• C)forward-looking accounting
• D)management accounting

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Definitions:

Identifiable Net Assets

Assets that can be separated from the company and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract.

Matching Principle

An accounting principle that dictates that expenses should be recorded in the same period as the revenues that are generated as a result of those expenses, to accurately represent the financial performance of a company.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life.

Cumulative Weighted Average Expenditure

A method to calculate the total sum of expenses over a period, where each expenditure is weighted based on its timing or relevance.