The accounting identity states:

Liabilities + Assets = Shareholders' Equity

Shareholders' Equity + Assets = Liabilities

Assets = Liabilities + Shareholders' Equity

Assets = Liabilities

Integrating the concepts of accrual basis accounting and the matching principle, suppose a manufacturer ordered and paid for six months of cleaning supplies on the last day of the accounting period. Would this be a cost or expense when that period's financials are published? (assuming the products have not yet been delivered and the company's policy is to make them inventoriable).

Cost

Expense

One difference between a cost and an expense is simply the timing in which the consumption of the resource is recognized. (True or False)

1. True
2. False

Earnings are used as a proxy for:

Future net income

Future cash flows

Current liabilities

Gross Revenues

The matching principle tells us which of the following:

Expenses associated with a sale should be recognized in the same period of the sale

Accounts receivable must be matched to specific customers that owe us money

A firm'sassets must in total equal the sum of its liabilities andstockholders'equity

The assets reported on the balance sheet for a specific time period should be matched to the revenues that are recognized during the same time period on the income statement.