Accounting Chapter 3 Review

If a company is using accrual basis accounting, when should it record revenue? 

• when cash is received, even though services may be performed at a later date 

• when cash is received, even though services may be performed at a later date 

• before services are performed

• before services are performed

Which of the following statements is true of accrual basis accounting?

• Accrual basis accounting records expenses only when cash has been paid for them. 

• Accrual basis accounting records revenue only when cash is received. 

• Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP). 

• Accrual basis accounting always results in greater net income than cash basis accounting

Which of the following accounts would be used under the accrual basis of accounting, but not under cash basis accounting?

• Unearned Revenue

• Service Revenue

• Salaries Expense

• Cash

The time period concept assumes that the activities of a business can be sliced into small time segments.

• True

• False

According to the Revenue Recognition Principle. Revenue is earned when ________

• (or as) the business satisfies each performance obligation 

• the business has received cash from the customer

• the business has received cash from the customer

• the journal entry to record revenue has been prepared 

Which of the following accounting elements does the matching principle help to match?

• expenses and assets

• expenses and liabilities

• revenues and liabilities

• expenses and revenues

Adjusting entries record revenues in the period in which cash is received and expenses in the period when cash is paid. 

• True

• False

Which of the following is NOT a type of adjusting entry?

• deferred revenues

• accrued revenues

• deferred expenses

• unearned expenses 

In a(n) ________ adjustment, the expense occurs before a cash payment is made

• accrued

• deferred

• general

• depreciation

Adjusting entries are needed to correctly measure the ________. 

• net income (loss) on the balance sheet 

• net income (loss) on the income statement

• beginning balance in the Cash account 

• ending balance in the Cash account