[SOLVED] Explain the expense recognition principle.

> Where is the information obtained that is needed in journalizing the closing entries?

> Describe how to calculate the following ratios: (a) Return on owner’s equity (b) Accounts receivable turnover (c) Inventory turnover

> Name and describe the calculation of two measures that provide an indication of a business’s ability to pay current obligations.

> What is the correcting entry method?

> Describe the nature of the two forms of an income statement.

> What is the ruling method of correcting an error?

> What is the purpose of workers’ compensation insurance, and who must pay for it?

> What is the purpose of Form I-9, Employment Eligibility Verification?

> If the total of the schedule of accounts payable does not agree with the Accounts Payable balance, what procedures should be used to search for the error?

> Identify the major documents commonly used in the purchasing process.

> What is the purpose of Form 941, Employer’s Quarterly Federal Tax Return?

> What steps are followed in posting cash payments from the general journal to the general ledger?

> Explain why an employee whose gross salary is $20,000 costs an employer more than $20,000 to employ.

> Describe the information contained in the payroll register.

> What is the purpose of the state unemployment tax, and who must pay it?

> Give three examples of unearned revenue.

> What is the purpose of the FUTA tax, and who must pay it?

> Distinguish between a cash discount and a trade discount.

> What is the purpose of the EFTPS?

> At what rate and on what earnings base is the employer’s Social Security tax levied?

> What is the purpose of Form 940, Employer’s Annual Federal Unemployment Tax Return?

> Why do employer payroll taxes represent an additional expense to the employer, whereas the various employee payroll taxes do not?

> Explain what an employer does with the amounts withheld from an employee’s pay.

> Distinguish between the payroll register and the employee earnings record.

> Name three types of temporary accounts.

> Identify the three payroll records usually needed by an employer.

> A firm is preparing to make adjusting entries at the end of the accounting period. The balance of the merchandise inventory account is $200,000. If the firm is using the periodic inventory system, what does this balance represent?

> In general, an employee is entitled to withholding allowances for what purposes?

> Identify the four factors that determine the amount of federal income tax that is withheld from an employee’s pay each pay period.

> Name three major categories of deductions from an employee’s gross pay.

> What is a transposition error?

> Identify the five major column headings on a work sheet.

> Explain the purpose of the work sheet.

> Explain why payroll processing centers and electronic systems are commonly used in payroll accounting.

> Why is it important for payroll accounting purposes to distinguish between an employee and an independent contractor?

> What is an asset’s depreciable cost?

> What is the purpose of depreciation?

> When lower-of-cost-or-market is assigned to the items that comprise the ending merchandise inventory, what does “cost” mean? What does “market” mean?

> What is a permanent account? On which financial statement are permanent accounts reported?

> Describe a plant asset.

> If additional investments were made during the year, what information in addition to the work sheet would be needed to prepare the statement of owner’s equity?

> Explain the matching principle.

> Describe two approaches to listing the expenses in the income statement.

> What is the book value of an asset?

> Identify the source of the information needed to prepare the income statement.

> What is the useful life of an asset?

> What is a contra-asset?

> Explain the historical cost principle.

> Which inventory method always follows the actual physical flow of merchandise?

> Explain the revenue recognition principle.

> What are the main functions of an accounting clerk?

> Explain the primary advantage of a general ledger account.

> In what order are the accounts customarily placed in the ledger

> Describe the four steps required to journalize a business transaction in a general journal.

> Where the first formal accounting record of a business transaction is usually made?

> Name the five types of financial statement classifications for which it is ordinarily desirable to keep separate accounts.

> Explain the purpose of a chart of accounts.

> Identify four user groups normally interested in financial information about a business.

> What two factors are taken into account by the weighted-average method of merchandise cost allocation?

> Give three reasons why a corporation may distribute a stock dividend.

> What is a slide error?

> Explain why the ledger can still contain errors even though the trial balance is in balance. Give examples of two such types of errors.

> What information is entered in the Posting Reference column of the journal as an amount is posted to the proper account in the ledger?

> What is the purpose of accounting?

> Identify three types of businesses according to activities.

> What is impairment?

> What is the most important value reported on the statement of cash flows when evaluating the financial health of a company?

> List the two supplemental disclosures required under the indirect method.

> Provide an example of a noncash investing and financing activity.

> Under the indirect method of preparing a statement of cash flows, what adjustment is made for gains and losses on the sale of equipment?

> In a period of rising prices, which inventory method will result in: (a) The highest cost of goods sold? (b) The lowest cost of goods sold? (c) The highest ending inventory? (d) The lowest ending inventory? (e) The highest gross profit? (f) The lowest gr

> Under the indirect method of preparing a statement of cash flows, what adjustment is made for depreciation expense?

> What are cash equivalents?

> Briefly describe the difference between a job order cost system and a process cost system.

> What details about a particular asset are provided by a property, plant, and equipment record?

> What costs are entered on the job cost sheet?

> Explain how to calculate a predetermined overhead rate.

> What information is provided by the daily time sheet?

> What two purposes are served by a materials requisition form?

> Which adjusting entries are reversed by ToyJoy?

> Describe the procedures for closing the factory overhead account.

> Is a physical inventory necessary under the perpetual system? Why or why not?

> When the adjustment is made to apply overhead to ending work in process, why are no entries made in the job cost ledger?

> What are the three inventories needed in a manufacturing business?

> Why are the balances in the factory overhead account not extended to the Income Statement and Balance Sheet columns of the work sheet?

> What is the relationship between the debit and credit balances in the factory overhead account when the overhead is said to be underapplied? Overapplied?

> To the financial statements in Problem 24-8B. Problem 24-8B: Amounts from the comparative income statement and balance sheet of Johnson Stores, Inc., for the last two years are as follows: REQUIRED Prepare a vertical analysis of the income statement a

> Amounts from the comparative income statement and balance sheet of Johnson Stores, Inc., for the last two years are as follows: REQUIRED Prepare a horizontal analysis of the statements. Add columns to show the amount of increase (decrease) and the percen

> Based on the financial statement data in Exercise 24-1B, Exercise 24-1B: Based on the comparative income statement and balance sheet for Falcon Designers, Inc., given on the next page, compute the following liquidity measures for 20-2 (round all calcu

> Is a physical inventory necessary under the periodic system? Why or why not?

> Based on the financial statement data in Exercise 24-1B, Exercise 24-1B: Based on the comparative income statement and balance sheet for Falcon Designers, Inc., given on the next page, compute the following liquidity measures for 20-2 (round all calcu

> Refer to the financial statements in Problem 24-8B. Problem 24-8B: Amounts from the comparative income statement and balance sheet of Johnson Stores, Inc., for the last two years are as follows: REQUIRED Calculate the following ratios and amounts for

> Based on the comparative income statement and balance sheet for Falcon Designers, Inc., given on the next page, compute the following liquidity measures for 20-2 (round all calculations to two decimal places): (a) Quick or acid-test ratio (b) Current rat

> Kennington Companyâs condensed income statement for the year ended December 31, 20-2, was as follows: Net sales â¦â¦â¦â¦â¦â&brvb

> Mulligan Companyâs income statement for 20-2 reported interest expense of $2,190. The comparative balance sheet as of December 31, 20-2 and 20-1, reported the following: Compute the amount of cash paid for interest in 20-2. 20-2 20-

> Murry’s consulting services issued a two-year, $5,000 note payable to acquire new office furniture. Show how this transaction is reported on the statement of cash flows.

Question: Explain the expense recognition principle.