The System of Preparing Financial Statements Based on Recognizing Revenues

question 161

Multiple Choice

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

• A) Accrual basis accounting.
• B) Operating cycle accounting.
• C) Cash basis accounting.
• D) Revenue recognition accounting.
• E) Current basis accounting.

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Definitions:

Minimum Efficient Scale

The smallest scale of production at which long-term average costs are minimized, reflecting the point at which economies of scale are fully exploited.

Exclusive Legal Right

An exclusive legal right is a privilege granted by law to an individual or entity to engage in a particular activity or to use a particular property, which is protected against infringement or unauthorized use by others.

Patent

is a legal right granted to an inventor or assignee, providing exclusive rights to make, use, or sell an invention for a certain number of years in exchange for public disclosure of the invention.

Pure Monopolist

A market situation where a single seller controls all the supply of a product or service with no close substitutes.