Assume Accrual Basis Accounting Is Used

question 95

Multiple Choice

Assume accrual basis accounting is used.Which of the following statements about income statement accounts is correct?

• A) Costs incurred to help generate revenue are only reported as expenses on the income statement if they are paid in cash in the same period as the revenue received.
• B) Revenue accounts are shown after the amount of expense accounts on the income statement.
• C) Revenue accounts include Cash, Accounts Receivable, and Unearned Revenue.
• D) There is no Net Income account.

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Definitions:

Inventory Methods

Techniques used to determine the cost of goods sold and ending inventory value, such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted average cost.

Days' Sales

A measure often used to evaluate the average time it takes for a company to convert its inventory into sales.

Lower-of-Cost-or-Market

An accounting principle that mandates inventory be recorded at the lower between its historical cost and current market value.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.