When Converting an Income Statement from a Cash Basis to an Accrual

question 22

Multiple Choice

When converting an income statement from a cash basis to an accrual basis,cash received for services:

• A)Exceed service revenue.
• B)May exceed or be less than service revenue.
• C)Is less than service revenue.
• D)Equals service revenue.

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Definitions:

FIFO Method

"First In, First Out," an inventory valuation method assuming that the first items purchased are the first ones sold, affecting the cost of goods sold and inventory value.

Cost Flow Method

An accounting technique used to value inventory and determine the cost of goods sold by assuming a flow of costs.

FOB Shipping Point

A shipping term indicating that the buyer takes responsibility for goods and their transportation costs as soon as the goods leave the seller's premises.

Goods In Transit

Merchandise or stock that has been shipped by the seller but has not yet been received by the purchaser.