21-1 Notes

Which accounting concept is being applied when an adjusting entry is made at the end of the fiscal period to record accrued revenue?

• Matching Principle

• Conservatism Principle

• Realization of Revenue

• Materiality Principle

Why does a business use reversing entries as part of its procedures for accounting for accrued interest expense?

• To maximize the interest income for the business

• To ensure that all interest income is recorded in the current fiscal period

• To avoid the inconvenience of determining how much, if any, of each cash payment is for interest expense incurred and accrued during the previous year and how much is incurred in the current year

• To simplify the process of recording interest income

When is an accrued expense recorded by an adjusting entry?

• At the time the expense is incurred

• At the end of the fiscal period

• At the beginning of the fiscal period

• At the time the expense is paid

What is the effect of not using reversing entries in accounting?

• It prevents double charges

• It simplifies the accounting process

• It ensures accurate financial statements

• It may result in incorrect financial statements

What is the purpose of an adjusting entry for accrued revenue?

• To record the revenue for the next fiscal period

• To ensure that revenue is recorded in the correct fiscal period

• To increase the balance in Accounts Receivable

• To decrease the balance in Cash

When is a reversing entry made for accrued interest expense?

• At the end of the fiscal period

• At the beginning of the new fiscal period

• At the time the interest expense is incurred

• At the time the interest expense is paid

What is the purpose of a reversing entry for accrued interest expense?

• To decrease the balance in Interest Expense

• To increase the balance in Interest Payable

• To ensure that interest expense in the previous fiscal period cannot be recorded again in the new fiscal period

• To record the interest expense for the current fiscal period