Accrual Accounting-9-22-2025

Multiple Choice

Which of the following is a key difference between accrual accounting and cash-basis accounting?

• Accrual accounting records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.

• Accrual accounting only records transactions when cash is received or paid.

• Cash-basis accounting recognizes revenue when goods are shipped.

• Cash-basis accounting is required by all publicly traded companies.

Open Ended

Why is understanding accrual accounting important for making informed financial decisions in a business?

Multiple Select

Which of the following are examples of noncash transactions recorded under accrual accounting?

• Sales on account

• Paying off loans

• Depreciation expense

• Purchases of inventory on account

Open Ended

Describe how accrual accounting handles both cash and noncash transactions. Provide examples of each type of transaction.

Multiple Choice

Which of the following statements about the time-period concept is correct?

• It requires companies to report accounting information at regular intervals.

• It only applies to companies using cash-basis accounting.

• It states that the fiscal year must always end on December 31.

• It prohibits the preparation of interim financial statements.

Open Ended

Explain why the fiscal year for a company may end on a date other than December 31. What factors might influence this decision?

Fill in the Blank

The ___ concept ensures that accounting information is reported at regular intervals.

Multiple Choice

Which of the following best describes when revenue should be recognized according to the revenue principle?

• When the business receives cash from the customer

• When the business delivers goods or performs a service for the customer

• When the invoice is sent to the customer

• When the business incurs an expense

Multiple Choice

According to the expense recognition principle, when should expenses be recognized?

• When cash is paid for the expense

• When the related revenue is earned

• At the end of the accounting period

• When the expense is approved by management

Fill in the Blank

In the example shown, if revenue is $700 and expense is $800, the result is a net ___ of $100.

Multiple Select

Which of the following are steps in the expense recognition principle?

• Identify all expenses incurred during the period

• Recognize expenses in the same period as related revenues are earned

• Record expenses only when cash is paid

• Subtract expenses from revenues to compute net income or net loss

Multiple Choice

Which of the following accounts would most likely require an adjusting entry at the end of the period?

• Cash

• Accounts payable

• Prepaid rent

• Common stock

Open Ended

Explain the difference between deferrals and accruals in the context of adjusting entries.

Multiple Choice

Why are prepaid expenses considered assets?

• Because they are paid in advance and provide future benefits

• Because they are always refundable

• Because they are liabilities

• Because they are expenses already incurred

Multiple Choice

Which of the following entries correctly records the adjusting entry for prepaid rent at the end of June?

• Debit Rent Expense $1,000; Credit Prepaid Rent $1,000

• Debit Prepaid Rent $1,000; Credit Rent Expense $1,000

• Debit Cash $1,000; Credit Rent Expense $1,000

• Debit Rent Expense $3,000; Credit Prepaid Rent $3,000

Open Ended

Describe the process of recording and adjusting prepaid rent for Alladin’s Travel Inc. during the month of June.

Multiple Choice

On June 2, Alladin Travel paid cash for cleaning supplies. What is the correct journal entry for this transaction?

• Debit Supplies $700; Credit Cash $700

• Debit Cash $700; Credit Supplies $700

• Debit Supplies Expense $700; Credit Cash $700

• Debit Cash $700; Credit Supplies Expense $700

Fill in the Blank

A count on June 30 indicates that $400 of supplies remain on hand. Fill in the blank: The amount transferred to Supplies Expense on June 30 is $___

Open Ended

Explain why land is an exception when considering depreciation of plant assets.

Multiple Choice

What journal entry should be made when equipment is purchased on account for $24,000?

• Debit Equipment $24,000; Credit Accounts Payable $24,000

• Debit Accounts Payable $24,000; Credit Equipment $24,000

• Debit Equipment $24,000; Credit Cash $24,000

• Debit Cash $24,000; Credit Equipment $24,000

Open Ended

Explain how the straight-line depreciation method is used to calculate annual and monthly depreciation for an asset.

Multiple Choice

Which accounts are affected when recording the depreciation expense for June, and what are their respective amounts?

• Depreciation Expense—Equipment $400 (debit), Accumulated Depreciation—Equipment $400 (credit)

• Equipment $400 (debit), Accounts Payable $400 (credit)

• Accumulated Depreciation—Equipment $24,000 (debit), Equipment $24,000 (credit)

• Depreciation Expense—Equipment $24,000 (debit), Equipment $24,000 (credit)

Fill in the Blank

A contra account always has a ___ account and its normal balance is ___ that of the companion account.

Multiple Choice

Based on the balance sheet of Alladin Travel, what is the book value of equipment at June 30 after accounting for accumulated depreciation?

• $23,600

• $24,000

• $18,000

• $41,600

Open Ended

Compare the reporting of plant assets and accumulated depreciation between Alladin Travel and The Walt Disney Company. What similarities and differences do you observe?

Open Ended

Reflecting on today's lesson, which learning objective do you feel most confident about, and which one would you like to explore further?