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:

Average Inventory

The mean amount of inventory held by a business over a specific period of time, calculated to assess inventory management efficiency.

Ending Inventory

The total value of all merchandise that a company has not sold at the end of an accounting period.

Beginning Inventory

The amount of merchandise prepared for sale at the start of a fiscal period.

Average Inventory

The mean value of the inventory over a specific time period, calculated by averaging the inventory levels at various times.