Because Adjusting Entries Allow the Proper Application of the Revenue

question 49

True/False

Because adjusting entries allow the proper application of the revenue recognition principle or the matching principle,they are a necessary part of cash-basis accounting.

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Definitions:

Net Income

The net income of a business, which is obtained by deducting all costs and taxes from its total revenue.

Physical Count

The actual tallying of inventory goods a company has on hand to verify stock levels and assess the need for adjustment in accounting records.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.

Cost Of Goods Sold

Expenses directly tied to the production process of goods a company markets.