According to the accrual accounting model, recognition of loss leads to decrease in a company’s net assets that did not arise due to a transaction with an owner of the business. Select one: True False
1.
According to the accrual accounting model, recognition of loss leads to decrease in a company’s net assets that did not arise due to a transaction with an owner of the business.
If the transferor of receivables surrenders control over them, the transaction involving receivables is treated as a sale, and any gain or loss is recognized in earnings.
Which of the following statements about the accrual accounting is NOT true?
Accrual earnings help measure a company’s performance better.
Accrual accounting income for a given period always provides a precise picture of a company’s economic performance in this period.
Accrual accounting better matches revenue with economic effort to receive it.
It is normal that accrual accounting revenue for a period does not correspond to cash receipts for the same period.
4.
Which of the following statements about Loss Contingencies is TRUE?
According to the U.S. GAAP, a loss contingency must be accrued by a charge to income if any of the two conditions is met: 1) it is probable that an asset has been impaired, or a liability has been incurred at the date of the financial statements; 2) the amount of the loss can be reasonably estimated.
According to the practice of accounting conservatism, contingency losses do not have to be accrued until they are confirmed, while contingency gains have to be recorded when the event confirming their receipt is probable.
If a loss is probable but cannot be estimated, it shall not be disclosed in the financial statements.
Remote Losses do not require disclosure.
5.
Costs that cannot be directly associated with specific revenues and expensed in the period benefited are called what?
Period costs
Costs of goods sold
Traceable costs
Marginal costs
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