FACH2 Homework - FACH2 Homework Questions 1. Cash basis and...

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FACH2 Homework Questions 1. Cash basis and accrual accounting differ in the timing in which revenue and expenses are recognized. In cash basis accounting, revenues and expenses are recognized (put on the income statement) when the actual exchange of cash occurs. By contrast, in accrual accounting, revenues are recognized when they are earned and expenses are recognized when they are incurred. When preparing generally accepted financial statements, accrual accounting is used. 14. According to the matching principle, costs are matched to revenues. In other words, costs are recognized at the same time as the revenues they help generate. For example, sales commissions would be an expense on the same income statement as the sales to which they pertain are shown as revenue. 15. Representational faithfulness means that financial information should be presented in a way that is not misleading. SE2-3 Applicable accounting principles: a. Accrual accounting b. Cost principle c. Matching principle d. Entity assumption
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SE2-4 Qualitative characteristics: 1. d: Consistency 2. a and b: Relevance and reliability 3. c: Comparability 4. b:  Reliability 5. e and b: Representational faithfulness and reliability SE2-5 Classification of financial statement items: a. Asset b. Asset c. Owners’ equity d. Liability e. Asset f. Asset g. Liability h. Asset i. Asset
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SE2-7 Pros and cons of the cost principle as a basis of accounting for assets: Two major qualities of financial information are relevance and reliability. Although cost
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FACH2 Homework - FACH2 Homework Questions 1. Cash basis and...

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