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1.
Under accrual accounting, a company recognizes revenue when _______.
The company has earned it. A company recognizes revenue when it is earned, determined by when a company sells its goods or provides its services. Under accrual accounting, revenue is not necessarily recognized when cash is received.
2.
Which of the following expenses is subtracted from sales when calculating operating profit?
SGA. Operating profit is sometimes called EBIT, or earnings before interest and taxes. Cost of goods sold and SGA are two of the main expenses subtracted from revenue in calculating operating profit.
3.
A company's cost of sales represents all of the expenses directly incurred in _______.
Creating goods or services. Cost of sales is also known as cost of goods sold or cost of services.
4.
Different companies recognizing revenue in different ways.
True. How a company recognizes revenue will depend on the nature of its revenue stream. For example, you might pay only once for a service at one company, but several times over time (think insurance premiums) at another place.
5.
The expenses directly incurred in creating the goods or services that a company sells are called _______.
All of the above. These are all different terms used for these expenses.
