When Performing Vertical Analysis of an Income Statement,the Base Amount

question 48

Multiple Choice

When performing vertical analysis of an income statement,the base amount is ________.

• A) total expenses
• B) net sales revenue
• C) sales revenue
• D) gross profit

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Definitions:

Matching Principle

An accounting principle that expenses should be recorded in the same period as the revenues they helped to generate, to provide a more accurate picture of financial performance.

Deferrals

Accounting transactions that involve recognition of revenues or expenses in a period different from when they are actually received or paid, to match revenues with expenses in the appropriate period.

Accruals

Accounting adjustments for revenues that have been earned or expenses that have been incurred but are not yet recorded in the accounts.

Deferred Revenue

Money received by a company for goods or services not yet delivered or performed, recorded as a liability until the transaction is completed.