3.1 Understand revenue recognition
1) IFRS requires the use of accrual accounting.
2) Because inventories are high, Sears should end its fiscal year in either November or December.
3) It does not matter when a fiscal year starts as long as it is twelve consecutive months long.
4) Accounting for revenue on an accrual basis means that no entry of revenue is made until the cash is actually received.
5) Recording office supplies as an asset after paying for them would be considered a deferral.
6) The majority of businesses normally end their fiscal year on:
A) June 30.
B) September 30.
C) December 31.
D) April 1.
E) some other date.
7) Part of accrual accounting depends upon recording __________ entries at the end of the fiscal year.
8) There are two types of accounting methods, cash and accrual. Review the two examples, and identify the accounting method.
1. If revenues are recognized and recorded when earned, the company is using the __________ basis of accounting.
2. If a business records expenses when paid, the company is using the __________ basis of accounting