Week 3 and 4 Review Questions

Which of the following is a purpose of adjusting entries in financial accounting?

• To close temporary accounts

• To comply with GAAP recognition and matching principles

• To record daily cash transactions

• To avoid preparing a trial balance

When a company earns interest but has not yet received it by period end, it records:

• Interest Expense

• Interest Receivable and Interest Revenue

• Unearned Interest Revenue

• Cash and Interest Revenue

Which principle ensures revenue is recorded in the period it is earned?

• Matching Principle

• Revenue Recognition Principle

• Historical Cost Principle

• Materiality Principle

Adjusting entries are made:

• Daily

• Only when cash changes hands

• At the start of the accounting period

• At the end of the accounting period before financial statements are prepared

Which of the following accounts typically requires an adjusting entry?

• Accounts Payable

• Prepaid Insurance

• Cash

• Share Capital

What type of account is created when a company receives payment before providing goods or services?

• Revenue

• Accounts Receivable

• Unearned Revenue

• Prepaid Expense

Depreciation is recorded to:

• Reflect increase in asset value

• Match revenue and asset purchase timing

• Allocate asset cost over its useful life

• Comply with cash-based accounting

Which of the following represents an accrued expense?

• Prepaid Rent

• Unpaid Utilities at month-end

• Unearned Fees

• Depreciation

Under accrual accounting, expenses are recognized when:

• Paid

• Incurred

• Budgeted

• Approved

Which entry correctly adjusts for revenue earned but not yet received?

• Dr Unearned Revenue / Cr Revenue

• Dr Cash / Cr Revenue

• Dr Accounts Receivable / Cr Revenue

• Dr Revenue / Cr Cash