Accrual Basis Accounting

The accrual basis of accounting requires revenue to be recorded when the service is performed.

• True

• False

Using accrual accounting, expenses are recorded and reported ______

• when they are incurred, whether or note cash is paid.

• when they are incurred and paid at the same time.

• if they are paid before they are incurred.

• if they are paid before they are incurred.

Unearned revenue is a stockholders' equity account.

• True

• False

Liabilities that will not be due for more than one year are called long-term liabilities.

• True

• False

Cash and other assets that are expected to be converted to cash or sold or used up within one year or less, through the normal operations of the business are called ______

• current assets.

• intangible assets.

• fixed assets.

• notes receivable.

Receivables are _____.

• assets.

• liabilities.

• revenues.

• expenses.

Under the revenue recognition principle, revenue is recorded when services have been provided or when a product has been delivered to a customer.

• True

• False

According to the matching principle, expenses must be recorded in the period of their occurrence, regardless of the payment period.

• True

• False

What is NOT true of adjustments?

• Adjustments are necessary when there are accrual transactions.

• The adjustment process is the updating of accounts that helps match revenues and expenses.

• The two types of accounts that need adjustment are accruals and deferrals.

• The adjustment process takes places after the preparation of financial statements.

____________ are created by recording a transaction in a way that delays recognition of an expense or revenue.

• Deferrals

• Accruals

• Adjustments

• Accounts