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ACG 2021 Exam 2 Review Questions and Complete Solutions
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  • ACG 2021

Revenue Recognition Principle companies recognize revenue in the accounting period in which the performance obligation was satisfied. Expense Recognition Principle matches expenses with revenues in the period in the period when the company makes effort to generate those revenues Cash-Basis Ac...

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  • August 11, 2024
  • 3
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • acg 2021 exam 2 review questions and complete sol
  • revenue recognition principle companies recognize
  • expense recognition principle matches expenses wi

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  • ACG 2021

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ACG 2021 Exam 2 Review Questions and
Complete Solutions
Revenue Recognition Principle ✅companies recognize revenue in the accounting
period in which the performance obligation was satisfied.

Expense Recognition Principle ✅matches expenses with revenues in the period in the
period when the company makes effort to generate those revenues

Cash-Basis Accounting ✅Revenues and Expenses are only recognized when cash is
received

Accrual - Basis Accounting ✅Transactions recorded in the period in which the events
occurred. (Revenue and Expense Principle)

Adjusting Entries ✅Entries made at the end of an accounting period to ensure that the
revenue and expense recognition principles are followed. (Will always include one
income statement account and one balance sheet account.) (Never include cash)

Two types of adjusting entries ✅Accruals and Deferrals

Accruals ✅Revenues or expenses incurred but not yet received or paid in cash
(increases both a balance sheet and income statement account)

Deferrals ✅Expenses paid or cash received before the expense or revenue were
incurred. (prepaid expenses or unearned revenues)

Prepaid Expenses ✅Asset! Not Expense!!!

useful life ✅the length of use of a productive asset

Depreciation ✅The process of allocating the cost of an asset to as expense over its
useful life (does not attempt to report the actual change in value of the asset)

Accumulated Depreciation ✅An anti-asset account to account for depreciation of an
asset while still being able to see how much the asset was originally purchased for. This
account keeps track of total depreciation of the asset

Book Value (Carrying Value) ✅The difference between the cost of a depreciable asset
and its related accumulated depreciation

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