Business Transaction (Part 2)

Generally, revenues is recognized:

• At the point of delivery of the goods to the customers.

• At the point of cash collections.

• When customers make their orders.

• When management chooses to do so.

Under the general rule, revenue is recognized when:

• The earning process is complete or virtually complete.

• The marketability and the market price of the products are assured.

• Cash is collected from the customer.

• All the expense related to the revenue can be identified and measured.

Which of the following expenses is recognized under the direct association with revenue criterion?

• Salesmen's commission

• Salaries of office staff

• Advertising expense

• Salary of the sales manager

Which of the following is not an acceptable basis of recognizing expenses?

• Critical measurement

• Direct association with revenue

• Immediate recognition

• Systematic and rational allocation

Which of the following is the reason why adjusting entries are prepared?

• Matching concept

• Qualitative characteristics of timeliness

• Periodicity concept

• Prudence or conservatism

Which of the following would not be used as an adjusting entry?

• Bad debt expense / Allowance for doubtful accounts

• Interest expense / Interest payable

• Prepaid rent / Rent expense

• Cash / Unearned revenue

The process of incorporating an accounting element or item in the financial statements is called:

• Realization

• Measurement

• Recognition

• Recording

On December 31, 2015, Typical Fashions had balances in its Accounts receivable and Allowance for uncollectible accounts of P48,400 and P940, respectively. During 2016, Typical Fashions wrote off P820 in Accounts receivable and determined that there should be an Allowance for uncollectible accounts of P1,140 at December 31, 2015. Bad debt expense for 2016 would be:

• P320

• P1,020

• P820

• P1,140

Pink Insurance collected premiums oP18,000,000 from its customers during the current year. The adjusted balance in the Unearned premiums account increased from P6 million to P8 million dollars during the year. What was Pink's revenues from earned insurance premiums for the current year?

• P18,000,000

• P20,000,000

• P16,000,000

• P10,000,000

Which trial balance lists all the business accounts before year-end adjusting journal entries are made.

• Post closing trial balance

• Adjusted trial balance

• Pre closing trial balance

• Unadjusted trial balance