An Accountant Who Keeps His Books Using Accrual Accounting Performs

question 53

Multiple Choice

An accountant who keeps his books using accrual accounting performs a service but does not receive payment at the time the service is performed.The entry made by the accountant will require a credit to:

• A) Unearned Expense
• B) Deferred Expense
• C) Service Revenue
• D) Unearned Service Revenue

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Definitions:

Break-Even Point

The production level or sales volume at which total revenues equal total costs, resulting in neither profit nor loss.

Margin of Safety

The difference between actual sales and the break-even point, indicating the level of risk in not covering fixed costs.

Composite Units

A measure used in costing to represent a bundle or mix of goods or services treated as a single unit.

Break-Even Point

The financial state in which total costs equal total revenues, resulting in neither profit nor loss.