Accounting Quiz 6/5/24

What is the main difference between Cash Basis Accounting and Accrual Basis Accounting?

• Cash Basis records revenues when cash is received, while Accrual Basis records revenues when they are earned.

• Cash Basis is commonly used in practice, while Accrual Basis is not.

• Cash Basis is a GAAP principle, while Accrual Basis is not.

• Cash Basis records expenses when cash is received, while Accrual Basis records expenses when they are incurred.

What is the Revenue Recognition Principle?

• Revenue is recognized when cash is received at the same time as the service is provided.

• Revenue is recognized only when cash is received before the service is provided.

• Revenues are recognised in the time frame where they are earned.

• Revenue is recognized only when cash is received after the service is provided.

Why are adjustments needed in accounting?

• To avoid recording any transactions involving cash.

• To make sure accounts are never up to date.

• To ensure financial statements are as inaccurate as possible.

• To record daily transactions involving cash.

What are Prepaid Expenses?

• Expenses that are paid after they are incurred.

• Expenses that are never recorded in accounting.

• Expenses that are paid in advance for future use.

• Expenses that are paid at the same time as they are incurred.

What is Unearned Revenue?

• Revenue that is earned but not recorded.

• Revenue that is received in advance for goods or services not yet provided.

• Revenue that is never received by the company.

• Revenue that is recorded before it is earned.

What is Depreciation in accounting?

• A method to decrease the value of assets over time.

• A random estimation of asset values.

• An accounting practice that is used to spread the cost of a tangible or a physical asset over the course of its useful life.

• A way to increase the value of assets over time.

How is Depreciation calculated using the Straight-line Method?

• Cost of asset plus estimated useful life.

• Cost of asset divided by estimated useful life.

• Cost of asset multiplied by estimated useful life.

• Cost of asset minus estimated useful life.

What is Accumulated Depreciation?

• Accumulated depreciation is the total depreciation that the asset has incurred over its life

• The amount of depreciation for a particular period.

• The value of an asset at the end of its useful life.

• The estimated value of an asset.

Which accounting principle records expenses whenever the revenues with which it can be reasonably associated with is earned?

• Matching Principle

• Accrual Basis Accounting

• Cash Basis Accounting

• Revenue Recognition Principle

What is the importance of Accrual Basis Accounting?

• It is not commonly used in practice.

• It is not a GAAP principle.

• It records revenues when they are earned and expenses when they are incurred.

• It produces misleading financial statements.