acct 1201 - ch. 3 learnsmart

Collecting cash from customers for services provided is a(n) _____. activity.

operating

Investing activities are concerned with acquiring long-term assets; financing activities provide the money needed to operate the business and to provide the capital for investing activities; and _____ activities are involved with providing goods and services to the customer.

operating

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

cash

On May 1, Cut-Above, Inc. collected $3,000 in advance from customers to mow their lawns in June. Under cash basis accounting, revenues in May will equal _____.

$3,000

Monster Music Company provided music lessons for customers and earned $10,000, receiving $6,000 in cash and recording an accounts receivable for the remainder. What is Monster Music Company's revenue under the cash basis accounting?

$6,000

Which of the following would appear only on accrual-based, and not cash-based, financial statements?

(O) Accounts receivable on the balance sheet (X) Cash collected from customers on the statement of cash flows (O) Unearned revenue on the balance sheet (x) Sales on the income statment

Under which of the following circumstances would cash basis accounting report higher expenses than accrual basis accounting in the current accounting period?

(O) Cash is paid in advance of services being provided (X) Cash is paid in the following accounting period of when the services were performed (X) Cash is paid in the same accounting period as the services were performed

Which of the following financial statement line items is not an expense?

(O) Prepaid Rent (X) Rent Expense (X) Salaries and Wages Expense (X) Advertising Expense

Which of the following are the five elements of the accounting equation?

(X) Assets, Liabilities, Revenues, Expenses, Dividends (X) Cash, Liabilities, Stockholders' Equity, Revenues, Expenses (O) Assets, Liabilities, Stockholders' Equity, Revenues, Expenses (X) Liabilities, Stockholders' Equity, Revenues, Dividends, Expenses

Which one of these activities is part of the operating cycle?

(X) Buying property, plant and equipment (O) Selling goods and services (X) Issuing new shares

Which of the following would affect the operating activities section of the statement of cash flows?

(X) Cash paid for land (O) Cash paid to suppliers (O) Cash received from customers (X) Cash paid to repay debt (O) Cash paid to employees

Which activities are part of the operating cycle?

- Buying goods and services - Paying cash to suppliers - Collecting cash from customers

Adjusting entries are required before financial statements are prepared to ensure that _____.

- all revenues earned during the period are recorded - all expenses incurred during the period are recorded

Adjusting entries _____.

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

The five elements of the account equation include _____.

- assets - expenses - liabilities - revenues - stockholders' equity

The five elements of the accounting equation are: _____, _____, stockholders' equity, _____ and _____.

- assets - liabilities - revenues - expenses

On June 1, Pizza Company paid $100 for advertisements to be run on June 1. Pizza Company's entry to record this payment will include a $100 _____.

- increase in Advertising Expense - decrease in Cash

Accrual basis accounting differs from cash basis accounting in that accrual basis accounting records _____.

- revenues n the period when the revenue is earned, even though the cash has not yet been collected - expenses in the period incurred, even though cash has not yet been paid

Although the unadjusted trial balance's debits equal credits, some balances are not properly stated because _____ have not yet been recorded.

- some revenues earned - some expenses incurred - adjusting entries

T-accounts (general ledger) show _____.

- the activity for the current period - the prior period ending balances as beginning balances for all balance sheet accounts - beginning balances of zero for all income statement accounts

_____ are the costs of operating a business that are incurred to generate revenues in the period covered by the income statement.

Expenses

_____ activities are the primary sources of revenue and expenses involved in running a business.

Operating

True or false: Expenses are the costs of operating a business that are incurred to generate revenues and are reported in the income statement.

True

True or false: Operating activities are the primary sources of revenue and expenses involved in running a business.

True; Unlike investing and financing activities, which occur infrequently and typically produce long-lasting effects, operating activities, such as buying and selling products or paying and receiving cash, occur regularly.

If the journal entry to record services provided to a customer on account was recorded with a debit to Accounts Receivable and a credit to Service Revenue, then the company is using _____ basis accounting.

accrual

Match the proper description with each of the 5 elements of the expanded transaction analysis model.

assets --> economic resources liabilities --> financing provided by creditors stockholders' equity --> financing provided by owners and reinvested earnings revenues --> resources generated from the delivery of goods or services expenses --> resources used

After increases and decreases in an account are recorded, the amount remaining in the account is its ending _____.

balance

Cash basis accounting may be used by organizations that _____.

do not need to report to external users

To see the detail of increases and decreases in a company's Cash account, you should look at _____.

the company's general ledger

The trial balance at year end shows _____.

the ending balance in each T-account