Quiz 2

Efforts (expenses) should be matched with results (revenues).

• Accrual-basis accounting

• Calendar year

• Time period assumption

• Expense recognition principle

• Cash-basis accounting

Accountants divide the economic life of a business into artificial time periods.

• Accrual-basis accounting

• Calendar year

• Time period assumption

• Expense recognition principle

• Cash-basis accounting

Companies record revenues when they receive cash and record expenses when they pay out cash

• Accrual-basis accounting

• Calendar year

• Time period assumption

• Expense recognition principle

• Cash-basis accounting

An accounting time period that starts on January 1 and ends on December 31.

• Accrual-basis accounting

• Calendar year

• Time period assumption

• Expense recognition principle

• Cash-basis accounting

Companies record transactions in the period in which the events occur

• Accrual-basis accounting

• Calendar year

• Time period assumption

• Expense recognition principle

• Cash-basis accounting

The revenue recognition principle states that

• revenue should be recognized in the accounting period in which a performance obligation is satisfied.

• expenses should be matched with revenues.

• the economic life of a business can be divided into artificial time periods.

• the fiscal year should correspond with the calendar year.

The time period assumption states that:

• companies must wait until the calendar year is completed to prepare fi nancial statements.

• companies use the fiscal year to report financial information.

• the economic life of a business can be divided into artificial time periods.

• companies record information in the time period in which the events occur.

Which of the following statements about the accrual basis of accounting is false?

• Events that change a company’s financial statements are recorded in the periods in which the events occur.

• Revenue is recognized in the period in which services are performed.

• The accrual basis is in accord with IFRS.

• Revenue is recorded only when cash is received, and expense is recorded only when cash is paid

The principle or assumption dictating that efforts(expenses) be matched with accomplishments(revenues) is the:

• expense recognition principle.

• cost assumption.

• time period principle.

• revenue recognition principle.

Adjusting entries are made to ensure that:

• expenses are recognized in the period in which they are incurred.

• revenues are recorded in the period in which services are provided.

• statement of financial position and income statement accounts have correct balances at the end of an accounting period

• All the responses above are correct.