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