Free Printable Day 3 Quiz Bank – Chapter 3: Adjustments & Accruals

1.

Prepaid expenses are recorded initially as:

a)

Liabilities

b)

Assets

c)

Expenses

d)

Revenues

2.

Unearned revenue represents:

a)

Revenue earned but not collected

b)

A liability until the service is performed

c)

An expense

d)

A contra-asset account

3.

Accrual-basis accounting records revenues when:

a)

Cash is received

b)

Work is performed

c)

Customers place an order

d)

Dividends are declared

4.

Cash-basis accounting recognizes expenses when:

a)

Work is performed

b)

Cash is paid

c)

Liabilities are created

d)

Matching principle is applied

5.

An adjusted trial balance is prepared to:

a)

Check posting accuracy before adjusting

b)

Verify debits = credits after adjustments

c)

Close temporary accounts

d)

Prepare budgets

6.

Which account is credited when recording accrued wages at the end of the period?

a)

Salaries Expense

b)

Salaries Payable

c)

Cash

d)

Retained Earnings

7.

Which of the following is an example of a prepaid expense?

a)

Rent paid in advance

b)

Salaries payable

c)

Unearned revenue

d)

Accounts receivable

8.

Which of the following is a liability account?

a)

Prepaid Insurance

b)

Unearned Revenue

c)

Supplies Expense

d)

Service Revenue

9.

Which entry is required to record revenue that has been earned but not yet received?

a)

Debit Cash, Credit Revenue

b)

Debit Accounts Receivable, Credit Revenue

c)

Debit Revenue, Credit Accounts Receivable

d)

Debit Unearned Revenue, Credit Revenue

10.

If a company fails to record an adjusting entry for accrued expenses, what is the effect on net income?

a)

Net income is overstated

b)

Net income is understated

c)

No effect on net income

d)

Net income is not reported

11.

Which of the following best describes the matching principle?

a)

Expenses are recognized when cash is paid

b)

Revenues are recognized when earned, expenses when incurred

c)

Revenues are recognized when cash is received

d)

Expenses are recognized when assets are purchased

12.

A company received cash in advance for services to be performed next month. What is the correct adjusting entry at month-end if no services have been performed?

a)

Debit Unearned Revenue, Credit Service Revenue

b)

No entry required

c)

Debit Cash, Credit Service Revenue

d)

Debit Service Revenue, Credit Unearned Revenue

13.

Which of the following is true regarding the adjusted trial balance?

a)

It is prepared before adjusting entries

b)

It includes all accounts and their final balances after adjustments

c)

It is used to close temporary accounts

d)

It only lists asset and liability accounts

14.

If a company records prepaid insurance as an asset, what adjusting entry is needed at the end of the period to recognize insurance expense?

a)

Debit Insurance Expense, Credit Prepaid Insurance

b)

Debit Prepaid Insurance, Credit Insurance Expense

c)

Debit Insurance Expense, Credit Cash

d)

Debit Cash, Credit Insurance Expense

15.

A company pays $1,200 for a one-year insurance policy on October 1. What amount should be reported as insurance expense on December 31?

a)

$1,200

b)

$300

c)

$900

d)

$100

16.

A business forgot to adjust for $2,000 of earned but unbilled service revenue. What is the effect on the financial statements?

a)

Assets and revenues are understated

b)

Liabilities are overstated

c)

Expenses are overstated

d)

Net income is understated, but assets are correct

17.

Given the following: Salaries Expense $5,000,\ Salaries\ Payable$ 1,000 (after adjustment). What was the amount of salaries paid during the period if the beginning Salaries Payable was $500?

a)

$5,500

b)

$4,500

c)

$6,000

d)

$5,000

18.

A company received $3,000\ cash\ for\ services\ to\ be\ per\ formed\ in\ the\ future.\ At\ year\ -end,$ 2,000 of the services have been performed. What is the adjusting entry?

a)

Debit Unearned Revenue $2,000,\ Credit\ Service\ Revenue$ 2,000

b)

Debit Service Revenue $2,000,\ Credit\ Unearned\ Revenue$ 2,000

c)

Debit Cash $2,000,Credit\ Service\ Revenue$ 2,000

d)

Debit Unearned Revenue $3,000,\ Credit\ Service\ Revenue$ 3,000

19.

If a company uses the cash basis of accounting, which of the following transactions would NOT be recorded?

a)

Cash received for services performed

b)

Services performed on account

c)

Cash paid for supplies

d)

Cash received in advance

20.

A company’s adjusted trial balance shows Supplies Expense of $800\ and\ Supplies\ on\ hand\ of$ 200. If the beginning balance of Supplies was $1,000, what was the amount of supplies purchased during the period?

a)

$1,000

b)

$1,600

c)

$0

d)

$800

Day 3 Quiz Bank – Chapter 3: Adjustments & Accruals

Total questions: 20

Worksheet time: 10hrs 0mins

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