Multiple Choice
Which of the following accounting terms is commonly used interchangeably with 'revenue'?
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3. Accrual Accounting Concepts
Revenue Recognition and Expense Recognition
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
If the company uses an accrual basis of accounting, what is their net income for the month of January?
A
$600
B
$1,000
C
$1,400
D
$1,600
E
None of the above
Verified step by step guidance1
Identify the total revenue for January by adding Cash Sales and Credit Sales. Revenue is recognized when earned under the accrual basis, regardless of when cash is received.
Calculate the total expenses for January. This includes Invoices Received from Suppliers and Cash Paid to Employees for work performed in January. Also, include Unpaid wages from the last three days of January, as expenses are recognized when incurred.
Subtract the total expenses from the total revenue to determine the net income for January.
Ensure that all revenues and expenses are accounted for in the period they are incurred, as per the accrual basis of accounting.
Review the calculations to ensure that all components of revenue and expenses have been included correctly to arrive at the net income.
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