Accrual Accounting Concepts

Client Jay pays ABC Co. $1,000 in December for ABC to perform services for Jay in 45 days. ABC uses the accrual basis of accounting. In December ABC will debit Cash for $1,000. What will be the other account involved in the December accounting entry prepared by ABC (and what type of account is it)?

• Accounts Receivable (asset)

• Prepaid Services (asset)

• Service Revenues (revenue)

• Unearned Revenues (liability)

ABC Co. performed services for Client Kay in December and billed Kay $4,000 with terms of net 30 days. ABC follows the accrual basis of accounting. In January ABC received the $4,000 from Kay. In January ABC will debit Cash, since cash was received. What account should ABC credit in the January entry?

• Accounts Receivable

• Service Revenue

• Owner's Equity

ABC Co. follows the accrual basis of accounting and performs a service on account (on credit) in December. The service was billed at the agreed upon amount of $3,500. ABC Co. debited Accounts Receivable for $3,500 and credited Service Revenue for $3,500. The effect of this entry on the balance sheet of ABC is to increase assets by $3,500 and to

• Decrease Assets By $3,500

• Increase Owner's (Stockholders') Equity By $3,500

Deferred credits will appear on the balance sheet with the

• Assets

• Liabilities

• Owner's/Stockholders' Equity

Notes Payable could not appear as a line on the balance sheet in which classification?

• Current Assets

• Current Liabilities

• Long-term Liabilities

ABC Co. has current assets of $50,000 and total assets of $150,000. ABC has current liabilities of $30,000 and total liabilities of $80,000. What is the amount of ABC's owner's equity?

• $20,000

• $30,000

• $70,000

• $120,000

The amount reported on the balance sheet for Property, Plant and Equipment is the company's estimate of the fair market value as of the balance sheet date.

• true

• false

The total amount reported for stockholders' equity is the approximate fair value or net worth of the corporation as of the balance sheet date.

• True

• false

The third line of the balance sheet at the end of the year should begin with "For the Year Ended".

• true

• false

The book value of a corporation is the total amount of stockholders' equity reported on the balance sheet.

• true

• false