Which of the Following Does NOT Correctly Describe the Implications

question 40

Multiple Choice

Which of the following does NOT correctly describe the implications of an executory contract on the accounting entries and/or disclosures to be made by the purchaser and/or seller?

• A) Assets and liabilities are usually recorded at inception of the contract.
• B) Assets and liabilities are usually not recorded at inception of the contract.
• C) Contract details should be disclosed if the amounts are abnormal in relation to the entity's normal business operations.
• D) Assets and liabilities are recognized as performance has occurred.

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Definitions:

Permanent Account

Financial accounts that are not closed at the end of an accounting period and whose balances are carried forward to the next period.

Post-closing Trial Balance

A financial statement prepared after closing entries are made, listing all the account balances to check the equality of debits and credits.

Accounting Cycle

The accounting process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.

Financial Statements

Formal records that convey the business activities and financial performance of a company, including balance sheet, income statement, and cash flow statement.