Match the term with its definition.
-An accounting method of recording profits when cash is received and recording expenses when they are paid
A)accrual-basis accounting
B)cash
C)cash-basis accounting
D)depreciable assets
E)depreciation expense
F)financial statements
G)inventory
H)liquidity
I)operating profit margin
J)return on assets
K)return on equity

Question

Quizplus · Accepted Answer

Cash-basis accounting is an accounting method of recording profits when cash is received and recording expenses when they are paid.

Answer: A 
 Accrual-basis accounting is an accounting method of recording revenues when they are earned and expenses when they are incurred, regardless of when cash is received or paid.

Answer: E 
 Depreciation expense is the gradual allocation of the cost of depreciable assets over their useful lives.

Answer: G 
 Inventory refers to the goods and materials that a company holds for sale to customers in the ordinary course of business.

Answer: H 
 Liquidity refers to a company's ability to meet its short-term financial obligations.

Answer: F 
 Financial statements are formal reports that summarize a company's financial activities, including its income statement, balance sheet, and cash flow statement.

Answer: I 
 Operating profit margin is a measure of a company's profitability, calculated by dividing its operating income by its revenue.

Answer: J 
 Return on assets is a measure of a company's profitability, calculated by dividing its net income by its total assets.

Answer: K 
 Return on equity is a measure of a company's profitability, calculated by dividing its net income by its shareholders' equity.

Match the Term with Its Definition