The Accrual Basis of Accounting Recognizes

question 73

Multiple Choice

The accrual basis of accounting recognizes:

• A) revenues when cash is received and expenses when cash is paid.
• B) revenues when earned and expenses when cash is paid.
• C) revenues when cash is received and expenses when incurred.
• D) revenues when earned and expenses when incurred.

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Definitions:

Supply Curve

The Supply Curve is a graphical representation showing the relationship between the price of a good or service and the quantity of that good or service that a supplier is willing and able to supply.

Marginal Cost Curve

A graph that shows the cost of producing one more unit of a good or service at each level of production.

Average Variable Cost

The cost per unit of varying inputs in the production process, calculated by dividing total variable costs by the quantity of output produced.

Economic Profits

Profits calculated by subtracting total explicit and implicit costs from total revenues; measures the excess over both the opportunity cost of capital and the wages that business owners could have earned elsewhere.