ACC 101 Chapter 3

69. The time period principle assumes that an organization's activities can be divided into specific time periods including:
A. Months.
B. Quarters.
C. Fiscal years.
D. Calendar years
E. All of these.

• E
• D
• C
• B
• A

70. A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the:
A. Operating cycle of a business.
B. Time period principle.
C. Going-concern principle.
D. Matching principle.
E. Accrual basis of accounting.

• D
• C
• B
• A
• E

71. Interim financial statements refer to financial reports:
A. That cover less than one year, usually spanning one, three, or six-month periods.
B. That are prepared before any adjustments have been recorded.
C. That show the assets above the liabilities and the liabilities above the equity
D. Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid.
E. Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.

• D
• C
• E
• B
• A

72. The 12-month period that ends when a company's activities are at their lowest point is called the:
A. Fiscal year.
B. Calendar year.
C. Natural business year.
D. Accounting period.
E. Interim period.

• C
• B
• A
• D
• E

73. The length of time covered by a set of periodic financial statements is referred to as the:
A. Fiscal cycle.
B. Natural business year.
C. Accounting period.
D. Business cycle.
E. Operating cycle.

• B
• A
• D
• E
• C

74. The accounting principle that requires revenue to be reported when earned is the:
A. Matching principle.
B. Revenue recognition principle
C. Time period principle.
D. Accrual reporting principle.
E. Going-concern principle.

• E
• C
• B
• A
• D

75. Adjusting entries:
A. Affect only income statement accounts.
B. Affect only balance sheet accounts.
C. Affect both income statement and balance sheet accounts.
D. Affect only cash flow statement accounts.
E. Affect only equity accounts.

• B

• D

• E

• A

• C

76. The main purpose of adjusting entries is to:
A. Record external transactions and events
B. Record internal transactions and events.
C. Recognize assets purchased during the period.
D. Recognize debts paid during the period.

E. Correct errors.

• E
• D
• B
• A
• C

77. The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:
A. Recognition principle.
B. Cost principle.
C. Cash basis of accounting.
D. Matching principle.
E. Time period principle.

• E
• A
• B
• C
• D

78. The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:
A. Accrual basis accounting.
B. Operating cycle accounting.
C. Cash basis accounting.
D. Revenue recognition accounting.
E. Current basis accounting.

• C
• B
• E
• D
• A