The Approach to Preparing Financial Statements Based on Recognizing Revenues

question 105

Multiple Choice

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

• A)Cash basis accounting.
• B)The expense recognition (matching)principle.
• C)The time period assumption.
• D)Accrual basis accounting.
• E)Revenue basis accounting.

---

Definitions:

Net Operating Income

A company's income after expenses, excluding taxes and interest, indicative of its operational profitability.

Planning Budget

A financial plan that outlines expected revenues, expenses, and resource allocations over a specific period, often used for decision-making and control.

Client-Visits

The occurrence of clients or customers visiting a business or service provider for purposes such as consultations, meetings, or receiving services.

Manufacturing Overhead

All manufacturing costs that are not directly traceable to a product, including indirect materials, indirect labor, and other indirect costs.