Basic Accounting - #2

Sales revenue should be recognized when goods and services have been supplied; costs are incurred when goods and services have been received. Which accounting concept governs this?

• The substance over form concept

• The materiality concept

• The accrual concept

• The duality concept

The concept of going concern can only be applied to a firm when it...

• is not expected to incur losses in the foreseeable future

• will never go bankrupt

• is expected to continue in business for a foreseeable future

• is not expected to be able to continue its operations

The accrual concept:

• applies to revenues and expenses only

• applies to assets and liabilities only

• applies to revenues, expenses, assets and liabilities

• is not a fundamental accounting concept

Adjusting the accounts is the process of:

• Zeroing out account balances to prepare for the next period.

• Subtracting expenses from revenues to measure profit.

• Recording transactions as they occur during the period.

• Updating the accounts at the end of the period

Unearned Revenues is always a (an)...

• Asset

• Revenues

• Liability

• Owner's Equity because you collected the cash in advance

The adjusted trial balance shows:

• Amounts that may be out of balance

• Revenues and expense only

• Amounts ready for the financial statements

• Assets, liabilities, and owner's equity only

Which of the following is not an application of accrual accounting?

• Adjusting the accounts

• Applying the cash basis of accounting

• Applying the matching rule

• Recognizing revenues when earned and expenses when incurred

The matching rule is applied...

• because it is required by the Tax Code

• by expensing certain items immediately and their entirety

• to make the bookkeeper's job easier

• to help produce a more accurate measurement of an entity's performance

A service vehicle might be depreciated over 5 years because...

• income tax provisions require depreciation over the next 5 years

• it will be paid for in 5 years

• it will help generate revenue for the company over the next 5 years

• it will lose most of its market value in 5 years

The journal entry to record an accrued expenses results in which of the following types of accounts being debited and credited?

• asset and income

• asset and liability

• expense and asset

• expense and liability