Profit is equal to:

• A. Income minus expenses
• B. Receipts minus expenditures
• C. Inflows minus outflows
• D. Revenue minus expenses

2. Which financial statement will tell you how profitable a company is?

• A. Income statement
• B. Cash flow statement
• C. Balance sheet
• D. All of the above

3. Under the accrual method of accounting, expenses are recorded:

• A. When they are paid.
• B. When invoices for expense items are received.
• C. When they are incurred

4. Recognition of Depreciation Expense:

• A. Results in a decrease in Income.
• B. Does not decrease Income because it is not a true cash expense
• C. Is required by the matching principle
• D. Both A and C

5. True or False: assets are typically recorded on the Balance Sheet at their estimated fair market value.

• A. True
• B. False