Question

Answer True or False

1. Recognition is the process of formally recording or incorporating an item into the financial statements.
2. When initially recording the cost of land purchased, most companies use the current value.
3. Under the accrual method expenses are recognized when revenue is earned.
4. Most companies use the cash basis of accounting.
5. Three months before year end Billings Company signed a $100,000 12%, 6- month note. Principal and interest will be paid at maturity. No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures.

Answer 1

Answer are as following

1. True - Recognition is the process of formally recording or incorporating an item into the financial statements. Reason It is true as recognition is the first step we incorporate a financial transaction in books
2. False - When initially recording the cost of land purchased, most companies use the current value. Reason No initial assets are recorded at what these are acquired not current value  
3. False- Under the accrual method expenses are recognized when revenue is earned. Reason No accrual concept says that credit transaction are also recorded no relation with revenue earned
4. False - Most companies use the cash basis of accounting. Reason Most companies uses accrual system of accounting not cash
5. False -Three months before year end Billings Company signed a $100,000 12%, 6- month note. Principal and interest will be paid at maturity. No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures Reason Accrued interest will be recorded at the end of the year

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