f3 3chapter

What is the time period assumption in accounting?

• The fiscal year should correspond with the calendar year.

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

• Revenue should be recognized in the accounting period in which it is earned.

• Expenses should be matched with revenues.

When are expenses recognized in accrual-basis accounting?

• When cash is received.

• When cash is paid.

• When incurred.

• When cash is earned.

What is the purpose of adjusting entries in accounting?

• To increase the reported liabilities.

• To decrease the reported expenses.

• To ensure that the revenue recognition and matching principles are followed.

• To delay the recognition of revenues.

What are the major types of adjusting entries?

• Prepaid Expenses, Unearned Revenues, and Accrued Liabilities.

• Accrued Revenues, Deferred Expenses, and Unearned Revenues.

• Accrued Revenues, Deferred Expenses, and Prepaid Expenses.

• Prepaid Expenses, Unearned Revenues, and Accrued Revenues.

What is the purpose of the adjusted trial balance?

• To record adjusting entries.

• To segregate account balances by assets and liabilities.

• To prepare financial statements directly.

• To prove the equality of total debit balances and total credit balances in the ledger.

When are revenues recognized in accrual-basis accounting?

• When cash is deposited.

• When cash is paid.

• When cash is received.

• When cash is earned.

What is the matching principle in accounting?

• Let the expenses follow the revenues.

• Match expenses with revenues in the period when the company makes efforts to generate those revenues.

• Recognize revenue in the accounting period in which it is earned.

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

What is the alternative treatment for prepaid expenses and unearned revenues?

• Credit the amount to a liability account for prepaid expenses and debit the amount to an expense account for unearned revenues.

• Debit the amount to an expense account for prepaid expenses and credit the amount to a revenue account for unearned revenues.

• Credit the amount to an expense account for prepaid expenses and debit the amount to a revenue account for unearned revenues.

• Debit the amount to a liability account for prepaid expenses and credit the amount to a revenue account for unearned revenues.

When are expenses recognized in cash-basis accounting?

• When cash is paid.

• When cash is earned.

• When cash is deposited.

• When cash is received.

What is the purpose of the adjusted trial balance?

• To record adjusting entries.

• To prove the equality of total debit balances and total credit balances in the ledger.

• To segregate account balances by assets and liabilities.

• To prepare financial statements directly.