The Approach to Preparing Financial Statements Based on Recognizing Revenues

question 149

Multiple Choice

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

• A) Cash basis accounting.
• B) The matching principle.
• C) The time period assumption.
• D) Accrual basis accounting.
• E) Revenue basis accounting.

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Definitions:

Work-in-Process Inventory

Goods in production but not yet completed; part of a company's inventory.

Direct Labor Costs

The wages or salaries paid to employees directly involved in the production of goods or services.

Overhead Costs

Expenses related to the day-to-day operations of a business that are not directly tied to a specific product or service.

Cost of Goods Manufactured

The total production cost of goods completed during a specific period, including labor, material, and overhead costs.