ACCOUNTING 212 CHAPTER 4 EXAM QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS) ALREADY GRADED A+

Recognition - ANS The process of recording an item in the financial statements as an asset, a liability, a revenue, an expense, or the like Historical Cost - ANS The amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets Current value - ANS The amount of cash or its equivalent that could be received by selling an asset currently Cash basis - ANS A system of accounting in which revenues are recognized when cash is received and expenses are recognized when cash is paid Accrual basis - ANS A system of accounting in which revenues are recognized when earned and expenses are recognized when incurred Revenues - ANS Inflows of assets or settlements of liabilities from delivering or producing goods, rendering services, or conducting other activities Revenue recognition principle - ANS Revenues are recognized in the income statement when they are realized, or realizable, and earned Matching principle - ANS The association of revenue of a period with all of the costs necessary to generate that revenue Expenses - ANS Outflows of assets or incurrences of liabilities resulting from delivering goods, rendering services, or carrying out other activities Adjusting entries - ANS Journal entries made at the end of a period by a company using the accrual basis of accounting Straight-line method - ANS The assignment of an equal amount of depreciation to each period Contra account - ANS An account with a balance that is opposite that of a related account Deferral - ANS Cash has been paid or received but expense or revenue has not yet been recognized Deferred expense - ANS An asset of resulting from the payment of cash before the incurrence of expense Deferred revenue - ANS A liability resulting from the receipt of cash before the recognition of revenue