Chapter 3

Question 1

Contra-asset

Answer 1

An asset that when increased, decreases the value of a related asset on the books (ex: accumulated depreciation, provision for bad debts)

Question 2

Accrual basis of accounting

Answer 2

Focuses on the flows of resources and the revenues those resources help to generate; revenues must be recorded when earned and resources when incurred (ex: major corp)

Question 3

Cash basis of accounting

Answer 3

Focuses on the flows of cash in and out of the organization; only records when cash is spent or receive