Accounting Chapter 3 Smartbook

Reporting revenues only when cash is received and expenses only when cash is paid is called the _________ basis of accounting. (Enter one word per blank.)

cash

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when: Multiple choice question. paid incurred, regardless of when it is paid the related revenue are recognized

paid

Closing entries move the balances from the ______ accounts into the Retained Earnings account. Multiple choice question. temporary balance sheet permanent

temporary

How do temporary accounts differ from permanent accounts? Multiple choice question. Only temporary accounts are used in the adjustments at the end of the accounting period. Only permanent accounts are transferred to Retained Earnings during the closing process. Only permanent accounts are found on the financial statements. Only temporary accounts are cleared out at the end of the accounting period.

Only temporary accounts are used in the adjustments at the end of the accounting period.

Andy records an adjusting entry for deferred revenue. Andy should: (Select all that apply.) Multiple select question. credit a revenue account debit a liability account credit a liability account debit revenue account

credit a revenue account debit a liability account

Adjusting entries are made at the ________ of the accounting period, while daily transactions are made throughout the accounting period. (Enter one word per blank.)

end

A classified balance sheet ______. Multiple choice question. shows changes in assets, liabilities, revenues and expenses contains confidential information groups asset and liabilities into current and long-term categories shows only current assets and current liabilities

groups asset and liabilities into current and long-term categories

Revenues and expenses are reported in the: Multiple choice question. statement of cash flows income statement balance sheet stockholders' equity statement

income statement

_________________ is the price earned from selling goods or services to customers. (Enter one word per blank)

revenue

At the beginning of the accounting period, the balances of temporary accounts Multiple choice question. are zero depend on whether the company was profitable during the prior period reflect the prior period ending balance

are zero

The post-closing trial balance checks that total _____________equal total ____________ at the end of the period. (Enter only one word per blank.)

debits credits

____________ is an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

depreciation

The two major categories reported in the income statement are: Multiple select question. equity revenue assets expense

revenue expense

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following? Multiple select question. credit to Cash credit to Revenue credit to Accounts Receivable credit to Deferred Revenue debit to Cash debit to Deferred Revenue

credit to Revenue debit to Deferred Revenue

________ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period. (Enter only one word.)

deferred

The statement of stockholders' equity includes these amounts: (Select all that apply.) Multiple select question. ending balance retained earnings cash dividends for the period total revenues for the period net income

ending balance retained earnings dividends for the period net income

Under cash-basis accounting, (Select all that apply.) Multiple select question. expenses are recorded in the period related revenue is generated. revenues are recorded when cash is received. revenues are recorded when goods or services are provided. expenses are recorded when cash is paid.

revenues are recorded when cash is received. expenses are recorded when cash is paid.

What are temporary accounts?

revenues, expenses, dividends

The post-closing trial balance helps to verify that: (Select all that apply.) Multiple select question. we prepared and posted adjusting entries correctly the accounts are ready for next period's transactions the company was profitable during the current period we prepared and posted closing entries correctly

the accounts are ready for next period's transactions we prepared and posted closing entries correctly

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as Multiple choice question. post-closing entries external entries adjusting entries c

closing entries

Depreciation is an allocation of the _________ of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

cost

Which of the following statements is true? Multiple choice question. Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts. The income statement reports the financial position of a company at a point in time. The balance sheet reports financial activities only for the current accounting period.

Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.

Consistent with the _______-basis of accounting, we record revenue when we provide goods and services to customers, and we record expenses in the period that costs are used to provide those goods and services.

accrual

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account. Multiple choice question. decrease; decrease increase; decrease increase; increase decrease; increase

decrease; increase

Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period. Multiple choice question. decreased; decreased decreased; increased increased; increased increased; decreased

decreased; increased

A primary purpose of adjusting entries is to record events that Multiple choice question. have occurred but that have not yet been recorded. have been recorded incorrectly. will occur at the beginning of the next period.

have occurred but that have not yet been recorded.

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through Multiple choice question. posting of non-cash transactions occurring during the year conversion to cash-basis recording of adjusting entries the preparation of an unadjusted trial balance

recording of adjusting entries

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents: Multiple choice question. the amount of revenues for which goods or services were provided during the current period, but not collected during the period. the amount of revenues for which goods or services were provided during the current period. the amount of the sales or services still owed to the customer.

the amount of the sales or services still owed to the customer.

Which of the following financial statements typically is prepared last? Multiple choice question. Statement of cash flows Balance sheet Statement of stockholders' equity Income statement

Statement of cash flows

Revenue in the income statement for the year ended December 31, 2018 equals the ______. Multiple choice question. amount earned by selling goods or services to customers during 2018 accounts receivable balance in the December 31, 2018 balance sheet amount of cash collected from customers during 2018

amount earned by selling goods or services to customers during 2018

Adjusting entries: (Select all that apply.) Multiple select question. are prepared at the beginning of the period. are required in cash-basis accounting only. update the accounts to their proper balances. are needed before financial statement preparation.

update the accounts to their proper balances. are needed before financial statement preparation.

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies: Multiple choice question. purchased, but not yet paid for, at the end of the accounting period purchased during the accounting period used during the accounting period on hand at the end of the accounting period

used during the accounting period

Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings? Multiple choice question. Statement of stockholders' equity Comprehensive income statement Balance sheet Income statement Retained earnings statement

Statement of stockholders' equity

Which of the following statements regarding the statement of cash flows are correct? Multiple select question. Reports cash disbursements The final financial statement that is typically prepared It is an optional financial statement The financial statement that is typically prepared first Reports cash receipts

Reports cash disbursements The final financial statement that is typically prepared Reports cash receipts

_____ are recorded in the period that goods and services are provided to customers and _____ are recorded in the period that costs are incurred while providing those goods and services. Multiple choice question. Revenues; expenses Expenses; expenses Expenses; revenues Revenues; revenues

Revenues; expenses

Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings? Multiple choice question. Balance sheet Comprehensive income statement Income statement Retained earnings statement Statement of stockholders' equity

Statement of stockholders' equity

Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate related revenues is referred to as _________-basis accounting. (Enter only one word.)

accrual

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by _________ entries.

adjusting

A prepayment that is originally recorded as an asset will be ______. Multiple choice question. allocated to future accounting periods based on the cost of the asset used during the period expensed in total at the end of the accounting period transferred to a liability account at the end of the accounting period allocated to future accounting periods equally over the periods receiving the benefit

allocated to future accounting periods based on the cost of the asset used during the period

What are permanent accounts?

assets, liabilities, common stock, retained earnings, equity

A classified balance sheet shows subtotals for current ________ and current ___________ . (Enter one word per blank)

assets; liabilities

A classified balance sheet shows subtotals for current ____________ and current _________. (Enter one word

assets; liabilities