Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter 3, Problem 3.1E
To determine
Match the definition with the related terms.
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a. What is your company’s primary revenue, secondary revenue, and gains?
b. What is your company’s primary expenses, secondary expenses, financial activity generated expenses, and losses?
c. What is the revenue trend? Does the 10-K or 10-Q discuss primary revenues, as well as other revenue types?
d. What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends?
Answer with Explanation
The revenue recognition principle dictates that revenue be recognized in the accounting period
Select one:
a. after it is earned.
b. before it is earned.
wh
the performance obligation is satisfied.
C.
d. in which it is collected
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Chapter 3 Solutions
Financial Accounting
Ch. 3 - Prob. 1QCh. 3 - Prob. 2QCh. 3 - Write the income statement equation and define...Ch. 3 - Explain the difference between a. Revenues and...Ch. 3 - Define accrual accounting and contrast it with...Ch. 3 - Prob. 6QCh. 3 - Explain the expense recognition principle.Ch. 3 - Explain why stockholders equity is increased by...Ch. 3 - Explain why revenues are recorded as credits and...Ch. 3 - Complete the following matrix by entering either...
Ch. 3 - Complete the following matrix by entering either...Ch. 3 - Prob. 12QCh. 3 - State the equation for the net profit margin ratio...Ch. 3 - Which of the following is not a specific account...Ch. 3 - Which of the following is not one of the criteria...Ch. 3 - The expense recognition principle controls a....Ch. 3 - Prob. 4MCQCh. 3 - Prob. 5MCQCh. 3 - Prob. 6MCQCh. 3 - Prob. 7MCQCh. 3 - Prob. 8MCQCh. 3 - Prob. 9MCQCh. 3 - Prob. 10MCQCh. 3 - Prob. 3.1MECh. 3 - Reporting Cash Basis versus Accrual Basis Income...Ch. 3 - Identifying Revenues The following transactions...Ch. 3 - Identifying Expenses The following transactions...Ch. 3 - Prob. 3.5MECh. 3 - Prob. 3.6MECh. 3 - Determining the Financial Statement Effects of...Ch. 3 - Prob. 3.8MECh. 3 - Prob. 3.9MECh. 3 - Identifying the Operating Activities in a...Ch. 3 - Prob. 3.11MECh. 3 - Prob. 3.1ECh. 3 - Reporting Cash Basis versus Accrual Basis Income...Ch. 3 - Identifying Revenues Revenues are normally...Ch. 3 - Identifying Expenses Revenues are normally...Ch. 3 - Prob. 3.5ECh. 3 - Determining Financial Statement Effects of Various...Ch. 3 - Recording Journal Entries Sysco, formed in 1969,...Ch. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 3 - Analyzing the Effects of Transactions in...Ch. 3 - Preparing an Income Statement Refer to E3-10....Ch. 3 - Prob. 3.12ECh. 3 - Analyzing the Effects of Transactions in...Ch. 3 - Prob. 3.14ECh. 3 - Prob. 3.15ECh. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19ECh. 3 - Prob. 3.20ECh. 3 - Prob. 3.1PCh. 3 - Recording Journal Entries (AP3-2) Ryan Terlecki...Ch. 3 - Prob. 3.3PCh. 3 - Prob. 3.4PCh. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Prob. 3.7PCh. 3 - Recording Nonquantitative Journal Entries (P3-1)...Ch. 3 - Prob. 3.2APCh. 3 - Prob. 3.3APCh. 3 - Prob. 3.4APCh. 3 - Prob. 3.5APCh. 3 - Prob. 3.6APCh. 3 - Accounting for Operating Activities in a New...Ch. 3 - Finding Financial Information Refer to the...Ch. 3 - Finding Financial Information Refer to the...Ch. 3 - Comparing Companies within an Industry Refer to...Ch. 3 - Analyzing a Company over Time Refer to the annual...Ch. 3 - Prob. 3.6CPCh. 3 - Evaluating an Ethical Dilemma Mike Lynch is the...
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- The revenue recognition principle states that: (a) revenue should be recognized in the accounting period in which a performance obligation is satisfied. (b) expenses should be matched with revenues. (c) the economic life of a business can be divided into artificial time periods. (d) the fiscal year should correspond with the calendar year.arrow_forwardWhich of the following principles matches expenses with associated revenues in the period in which the revenues were generated? Group of answer choices 1.revenue recognition principle 2.expense recognition (matching) principle 3.cost principle 4.full disclosure principlearrow_forwardMatch the statements below with the accounting assumption, characteristic, or principle to which the statement relates. Assumptions/characteristics/principles may be used once, more than once, or not at all. Recorded when the performance obligation is satisfied. a. Revenue recognition principle V The reason for recording accruals and deferrals in adjusting entries. b. Matching principle Valuing assets at amounts originally paid for them. C. Historical cost principle Entity assumed to have a long life d. Going concern assumption Description of significant accounting policies and unusual events. e. Full disclosure principle v Information has predictive and confirmatory value. T. Relevance characteristic 8. Consistency characteristicarrow_forward
- Question: Which accounting principle states that revenue should be recognized when it is earned and expenses when they are incurred? a. Matching principle b. Revenue recognition principle c. Conservatism principle d. Time period principlearrow_forwarda. What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends? b. Are there any trends in sales and marketing expenses or research and development? Are these amounts reasonable for the type of business? c. Compare general and administrative expenses to similar companies. Are they reasonable? d. What is the ratio of net interest income (expense) to income from operations? Is this a safe ratio for the company? Why or why not?arrow_forwardWhich of the following is the principle that a company must recognize revenue in the period in which it is earned; it is not considered earned until a product or service has been provided? A. revenue recognition principle B. expense recognition (matching) principle C. cost principle D. full disclosure principlearrow_forward
- Read each definition below and write the number of the definition in the blank beside the appropriate term. The quiz solutions appear at the end of the chapter. Understandability Relevance Faithful representation Comparability Depreciation Consistency Materiality Conservatism Operating cycle Current asset Current liability Liquidity Working capital Current ratio Single-step income statement Multiple-step income statement Gross profit Profit margin Auditors report An income statement in which all expenses are added together and subtracted from all revenues. The magnitude of an accounting information omission or misstatement that will affect the judgment of someone relying on the information. The capacity of information to make a difference in a decision. An income statement that shows classifications of revenues and expenses as well as important subtotals. The practice of using the least optimistic estimate when two estimates of amounts are about equally likely. The quality of accounting information that makes it comprehensible to those willing to spend the necessary time. Current assets divided by current liabilities. The quality of information that makes it complete, neutral, and free from error. An obligation that will be satisfied within the next operating cycle or within one year if the cycle is shorter than one year. Current assets minus current liabilities. Net income divided by sales. For accounting information, the quality that allows a user to analyze two or more companies and look for similarities and differences. An asset that is expected to be realized in cash or sold or consumed during the operating cycle or within one year if the cycle is shorter than one year. The ability of a company to pay its debts as they come due. For accounting information, the quality that allows a user to compare two or more accounting periods for a single company. The process of allocating the cost of a long-term tangible asset over its useful life. The period of time between the purchase of inventory and the collection of any receivable from the sale of the inventory. Sales less cost of goods sold. The opinion rendered by a public accounting firm concerning the fairness of the presentation of the financial statements.arrow_forwardWhich of the following principles matches expenses with associated revenues in the period in which the revenues were generated? A. revenue recognition principle B. expense recognition (matching) principle C. cost principle D. full disclosure principlearrow_forwardIf a company capitalizes costs that should be expensed, how is its income statement for the current period impacted? A. Assets understated B. Net Income understated C. Expenses understated D. Revenues understatedarrow_forward
- n: In a sheet of paper, write TRUE if the statement is correct and FALSE if the statement is incorrect. 1. The revenue earned by a service business for rendering services for a fee is commonly referred to as Service Income or Service Revenue. 2. A Statement of Comprehensive Income may be presented using a “multistep statement” presentation only. 3. Revenue includes both income and gains. 4. If expenses are greater than income, the difference is net loss. 5. The revenue earned by the merchandising business from its sales of goods is commonly referred to as Sales. 6. Income increases economic benefits during the period in the form of inflows of cash from rendering services. 7. The statement of Comprehensive Income shows information on an entity’s financial performance during the period. 8. A Statement of Comprehensive Income that shows expenses by its function is referred to as prepared using a single-step approach. 9. Expenses encompass both…arrow_forwardSelect all the items that are not relevant for decision making from the list below: A. Loss in gross margin B. Direct advertising C. General advertising D. Rent E. Depreciation: Store fixtures F. Depreciation: Delivery equipment G. Store management salaries H. General office salaries I. General office - other J. Insurance K. Utilities L. Employment taxesarrow_forwardMatch each concept with the definition that best describes it. Expense recognition principle (matching [ Choose] principle) [ Choose ] Accounting basis in which companies record transactions that change a company's financial statements in the periods in which the events occur. Accounting basis in which companies record revenue when they receive cash and an expense when they pay out cash. The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied. Information that accurately depicts what really happened. The principle that companies recognize expense in the period in which they make efforts (consume assets or incur liabilities) to generate revenue. An assumption that accountants can divide the economic life of a business into artificial time periods. Monthly or quarterly accounting time periods. An accounting period that extends from January 1 to December 31. Revenue recognition principle Time period assumption Calendar year…arrow_forward
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