The Accounting Principle That Requires a Company to Record Warranty

question 58

Multiple Choice

The accounting principle that requires a company to record warranty expense in the same period that it records sales revenue is the:

• A)going concern principle.
• B)expense recognition principle.
• C)conservatism principle.
• D)consistency principle.

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Definitions:

Cash Dividend

A payment made by a company out of its earnings to shareholders, typically in the form of cash.

Shares Issued

The number of shares that have been allocated and are held by shareholders, including both public investors and company insiders or affiliates.

Treasury Stock

Stocks that have been initially distributed and then bought back by the company that issued them, thus decreasing the quantity of available shares in the market.

Contra Equity Account

An equity account where balances are opposite to the normal accounts and are used to reduce the value of equity accounts.