If an Event or Transaction Leads to the Recognition of Revenue

question 14

True/False

If an event or transaction leads to the recognition of revenue, firms match the consumption of any assets (the expense), in time, with the revenue recognized.

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Definitions:

Capital Investment

Funds invested in a firm or enterprise for the purpose of furthering its business objectives.

Stand-Alone Principle

Evaluation of a project based on the project’s incremental cash flows.

Equivalent Annual Cost

A financial analysis tool used to compare the cost effectiveness of different assets by breaking down their costs into equivalent annual amounts.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time for an investment.