Cash basis of accounting
Cash basis of accounting refers to the recognition of financial transactions only when the cash is received or paid.
Fiscal year
The fiscal year refers to the accounting period of 1 year, which may not be the usual calendar year (starts from January, 1 to December, 31), used by the business entities for accounting purpose. This fiscal year varies differently for different countries.
The revenue recognition principle
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
The expense recognition principle
The expense recognition principle refers to the expenses that should match with revenue (matching principle) in the period when the company incurred expenses in order to generate the revenue.
To match: The given concepts with the descriptions.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
- Rosie Dry Cleaning was started on January 1, Year 1. It experienced the following events during its first two years of operation: Events Affecting Year 1 1. Provided $45,000 of cleaning services on account. 2. Collected $39,000 cash from accounts receivable. 3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account. Events Affecting Year 2 1. Wrote off a $300 account receivable that was determined to be uncollectible. 2. Provided $62,000 of cleaning services on account. 3. Collected $61,000 cash from accounts receivable. 4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account.arrow_forwardBoth are sub parts of single question 1.1 Which of the following is an example of an accrued revenue?a. Interest on debt incurred during the year, to be paid in the first quarter of thesubsequent yearb. Rent paid at the beginning of the year and debited to an expense account.c. Depreciation expensed. Rent earned during the period, to be received at the begining of the next year 1.2 Which of the following statements is correct about closing entries?a. Must debit or credit one income statement account and one statement of financialposition accountb. Include closing the dividends account to income summaryc. All of these choices are correctd. Are posted to the appropriate general ledger accountsarrow_forwardThe revenue recognition principle dictates that revenue should be recognized in the accounting records Select one: a. when cash is received. b. in the period that income taxes are paid. c. when the performance obligation is satisfied. d. at the end of the month.arrow_forward
- Which of the following are items which are likely to need an accrual adjustment at the year end? Select one: A. Motor vehicles B. Bank O C. Interest received O D. Salesarrow_forwardPlease check my work  For journal entries 1 through 12, indicate the explanation that most closely describes it. You can use explanations more than once. To record receipt of unearned revenue. To record this period's earning of prior unearned revenue. To record payment of an accrued expense. To record receipt of an accrued revenue. To record an accrued expense. To record an accrued revenue. To record this period's use of a prepaid expense. To record payment of a prepaid expense. To record this period's depreciation expense.arrow_forwardJ. To record cash payment of a prepaid expense. Explanation Insurance Expense Journal Entries Prepaid Insurance Interest Receivable Interest Revenue Interest Expense Interest Payable Accounts Payable Cash Cash Accounts Receivable (from services) Prepaid Rent Cash Unearned Revenue Cash Services Revenue Unearned Revenue Depreciation Expense Accumulated Depreciation Salaries Expense Salaries Payable ma Dobit 3,180 3,300 2,208 1,700 12,300 500 19,250 4,200 38,217 13,280 Credit 3,180 3,300 2,208 1,700 12,300 500 19,250 4,200 38,217 13,280arrow_forward
- For journal entries 1 through 10, identify the explanation that mostly closely describes it. A. To record this period's depreciation expense. B. To record accrued salaries expense. C. To record this period's use of a prepaid expense. D. To record accrued interest revenue. E. To record accrued interest expense. F. To record the earning of previously unearned income. G. To record cash receipt of unearned revenue. H. To record cash payment of an accrued expense. 1. To record cash receipt of an accrued revenue. J. To record cash payment of a prepaid expense. Explanation Insurance Expense Journal Entries Prepaid Insurance Interest Receivable Interest Revenue Interest Expense Interest Payable Accounts Payable Cash Cash Accounts Receivable (from services) Prepaid Rent Cash Unearned Revenue Services Revenue Cash Unearned Revenue Depreciation Expense Accumulated Depreciation Debit 3,180 3,300 2,208 1,700 12,300 500 19,250 4,200 38,217 Credit 3,180 3,300 2,208 1,700 12,300 500 19,250 4,200…arrow_forwardplease answer in good accounting form thankyou 6. At year-end, what amount should be reported as total noncurrent liabilities?arrow_forwardWhich of the following best describes the proper accounting for interim financial reports? a. The interim period is viewed as an integral part of the annual accounting period. b. The interim period is viewed as a distinct, independent accounting period. c. Interim net income should be determined by using the same principles as those for the annual accounting period. d. Net income should be computed on the cash basis except for sales, cost of goods sold, and depreciation.arrow_forward
- The revenue recognition principle states that all types of incomes should be recorded or recognized when:  Cash is received At the end of the accounting period When they are earned When the interest is paidarrow_forwardSuppose that at the end of the year there is an outstanding note receivable. The adjusting entry to recognize the interest to be paid has what effect on the accounting equation?arrow_forwardFor each of the following accounts, indicate whether the account is shown in the income statement or the balance sheet:Accounts                      Financial Statement 1. Accounts Receivable            ___________________2. Deferred Revenue              ___________________3. Supplies Expense              ___________________4. Salaries Payable               ___________________5. Depreciation Expense           ___________________6. Service Revenue               ___________________arrow_forward
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