Account ing Exam 2 #3

in August

A doctor performed surgery in April and did not receive cash payment from the patient until August. Under cash-basis ​accounting, the doctor recognizes​ revenue:

in March

A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual​ accounting, the doctor recognizes​ revenue:

True

Accrual accounting records the impact of both cash and noncash business transactions as they occur.

less than one year

An interim period used for reporting purposes is​ generally:

False

Cash-basis accounting is a more faithful representation of economic reality than accrual accounting.

True

Expenses are the costs of assets used up and liabilities created in earning revenue.

False

Expenses have a future benefit to the company.

True

Generally Accepted Accounting Principles​ (GAAP) require the use of accrual accounting.

False

Since accrual accounting follows the revenue principle and the expense recognition​ principle, all ethical challenges are avoided.

True

The basic defect of cash-basis accounting is that the cash basis ignores important information.

False

The expense recognition principle recognizes expenses in the period they are paid.

True

The only way for a business to know for certain how well it performed is to shut​ down, sell the​ assets, pay the​ liabilities, and return any leftover cash to the owners.

time -period concept

The requirement to report accounting information at regular intervals is known as​ the:

B. when to record revenue and the amount of revenue to record.

The revenue principle deals with the​ following: A. when to record revenue and where to record this revenue. B. when to record revenue and the amount of revenue to record. C. when to record revenue and when to record related expenses. D. where to record revenue and the amount of revenue to record.

True

The revenue principle determines when to record revenue and the amount of revenue to record.

False

The revenue principle states that revenue should be recorded in the same period as the cash is received.

False

The time-period concept ensures that the accounting information follows the framework of concepts and principles.

cash

The​ ________ basis of accounting records revenues ONLY when cash is received.

when the services are​ performed, regardless of when the cash is received.

Under accrual​ accounting, revenue is​ recorded:

delivery of goods to the customer

Under accrual​ accounting, the event that triggers revenue recognition for the sale of goods is​ the:

​revenues; expenses

Under cash-basis ​accounting, cash receipts are treated as​ ________ and cash payments are treated as​ ________.

True

Under cash-basis ​accounting, no journal entry is recorded when a sale is made on account.

D. GAAP requires accrual accounting.

Which of the following is a CORRECT statement about the two bases of​ accounting? A. Only the largest companies in the United States use accrual accounting. B. Cash-basis accounting records expenses only at the end of the month. C. Cash-basis accounting records revenues when they are earned. D. GAAP requires accrual accounting.

B. Interim financial reports are rarely prepared.

Which of the following statements regarding the time-period concept is NOT​ correct? A. Accountants prepare financial statements for specific periods of time. B. Interim financial reports are rarely prepared. C. Most large companies use a calendar year for financial reporting. D. The basic accounting period is one year.

purchasing of inventory on account

Which of the following transactions would be recorded under accrual accounting but NOT under cash-basis ​accounting? A. purchasing of inventory on account B. collecting cash from customers C. issuing stock for cash D. borrowing money from the bank