Accounting Quiz 2 (Topics 3 & 4)
accrual basis accounting
Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP).
Which of the following is the most liquid asset?
Cash...
Which of the following is a plant asset?
Equipment
The permanent accountslong dash—assets, liabilities, and stockholders' equitylong dash—are closed to the Owner, Capital account. T/F
False
The Owner, Capital account is a temporary account. T/F
False
The accountant for Noble Jewelry Repair Services forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?
Net income is overstated.
Which of the following accounts will be closed by debiting the Income Summary account?
Salaries Expense
The accountant of Skyscrapers Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?
The total assets will be overstated.
In the case of deferred revenue, the adjusting entry at the end of the period includes a credit to Service Revenue. Assume the deferred revenue is initially recorded as a liability. T/F
True
The post-closing trial balance shows the updated Owner, Capital balance. T/F
True
The current ratio measures a company's ________.
ability to pay current liabilities with current assets
Financial statements are prepared from the balances in a(n) ________.
adjusted trial balance
Closing entries are journalized and posted ________.
after preparing the financial statements
The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________.
deferred revenue
Under accrual basis accounting, an expense is recorded only when cash is paid. T/F
false
All assets that will not be converted to cash or used up within the business's operating cycle or one year, whichever is greater, are called ________.
long-term assets
Which of the following categories of accounts are temporary accounts that are closed at the end of the year?
revenues, expenses, and owner's withdrawals
assumes that financial statements of a business can be prepared for specific periods
time period concept