The Approach to Preparing Financial Statements Based on Recognizing Revenues

question 41

Multiple Choice

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

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

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Definitions:

Reference Prices

The prices that consumers consider reasonable and fair for a product.

Break-Even Point

The point at which the costs of producing a product equal the revenue made from selling the product.

Variable Costs

Costs that vary depending on the number of units produced or sold.

Units Produced

Units Produced refers to the total number of units of a product that are manufactured during a specific period.