Which of the following is not true?
A)Net income or profit for a period is the difference between revenues from selling goods and services and the expenses incurred to generate those revenues, plus some gains or losses of the period.
B)If the expenses plus losses exceed the revenues plus gains, the result is a net loss.
C)U.S.GAAP and IFRS require the accrual basis of accounting, which detaches the recognition of revenue from the receipt of cash.
D)A seller recognizes revenues when it has performed all, or nearly all, of its obligations to the customer and when it has received cash or an asset that is convertible to cash.
E)The firm recognizes and reports expenses that have a causal link with revenues, such as cost of sales, in the next accounting period.

Question

Quizplus · Accepted Answer

The statement that "the firm recognizes and reports expenses that have a causal link with revenues, such as cost of sales, in the next accounting period" is not true. Expenses that have a causal link with revenues, such as cost of sales, should be recognized in the same accounting period as the related revenues. This is the matching principle of accounting, which requires that expenses be recognized in the same period as the related revenues in order to properly reflect the economic performance of the business.

Which of the Following Is Not True