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1.
The expense that represents a piece of equipment's normal wear and tear over time is called what?
Depreciation expense. Depreciation refers to a tangible asset's gradual loss of value over time.
2.
Which of the following best measures the results of a company's primary business?
Operating income. Operating income measures the results of a company's main operations or lines of business. Gross profit measures the markup of a company's goods or services but does not include certain overhead expenses. Net income often includes other items, such as interest expense, interest income, and one-time charges.
3.
Under accrual accounting, a company records an expense when _______.
The company has incurred it. A company records an expense when it is incurred. Under accrual accounting, expenses are not necessarily incurred when cash is spent.
4.
A company's sales, minus its cost of sales, is known as _______.
Gross profit. Gross profit is defined as sales (or revenue) minus cost of sales.
5.
'Sales' is another word for revenue.
True. The two normally mean the same thing, though 'revenue' is more commonly used.
