ACC 210 - Chapter 3 LearnSmart

___ is defined as the "cost of borrowing money." Since the account represents all the cost incurred during the period on borrowed money, it is classified as a(n) ___ account.

Interest; expense

Which of the following trial balances shows account balances that incorporate current year deferrals and accruals?

Post closing trial balance and adjusted trial balance.

Which of the following statements is true regarding the post-closing trial balance?

The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.

A classified balance sheet shows subtotals for current ___ and current ___.

assets, liabilities

The primary components of net income are:

expenses and revenues

Under the accrual basis of accounting, the ___ principle requires that expenses be recognized in the same period as the related revenues.

matching

The post-closing trial balance helps to verify that:

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

Steps in the adjustment process as the end of the accounting period:

1. Using the unadjusted trial balance, determine the accounts requiring adjustment. 2. Record the adjusting entries in the journal. 3. Post the adjusting journal entires to the T-accounts. 4. Prepare an adjusted trial balance to check the equality of the debits and credits.

___ 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.

Deferred

Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

Which of the following are reported as stockholders' equity on a classified balance sheet?

Retained earnings and common stock

___ is the price earned from selling goods or services to customers.

Revenue

If a company determines that it has $x of supplies on hand at the end of the period:

The company has $x in supplies remaining at the end of the period.

Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate these revenues is referred to as ___ -basis accounting.

accrual

The accounting basis that helps measure and report revenues and expenses in a way that clearly reflects the ability of a company to generate value for its owners is referred to as

accrual-basis accounting

The ___ trial balance shows a list of all accounts and their balances after we have updated account balances for adjusting entries.

adjusted

After posting adjusting entires to the general ledger, a company typically prepares:

an adjusted trial balance

Adjusting entires:

are needed in order to measure the period's net income or loss. update the accounts to their proper balances.

Reporting revenues only when cash is received and expenses only when cash is paid is called the ___ basis of accounting.

cash

Long-term assets are expected to provide benefits for

more than one year

Which activities are part of the operating cycle?

paying cash to suppliers, buying goods and services, and collecting cash from customers.

Preparing a(n) ___-___ trial balance is the last step in the accounting cycle.

post-closing

Balance sheet

reports assets, liabilities, stockholders' equity

Income statement

reports revenue minus expenses

According to the ___ ___ principle, revenues should be recognized when goods or services are provided to customers, not necessarily when cash is received.

revenue recognition

A company may properly classify an asset that provides benefits for 15 months as a current asset if:

the company's operating cycle is longer than one year.