Chapter 4 Accrual Accounting Concepts Orion
Q 4.40: Diane Vasquez, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. While making the entry she will debit Cash and credit A Accounts Receivable. B Unearned Revenue. C Earned Revenue. D Expenses.
A Accounts Receivable.
Q 4.28: Revenue and expense accounts will have a zero balance due to closing entries at the fiscal year end. This is correct answer : A True B False
A True
Q 4.34: Prepaid expenses have been recorded, while accrued expenses have not. You got it correct : A True B False
A True
Q 4.36: The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2nd and recorded the purchase as an asset. On June 30th, an inventory of the laundry supplies indicated only $1,000 on hand. The adjusting entry on June 30th is debit Supplies Expense, $5,500; credit Supplies, $5,500. A True B False
A True
Q 4.37: Accepting cash from an established customer for services to be performed over the next three months is not an application of revenue recognition. A True B False
A True
Q 4.29: The accounts of a business before an adjusting entry is made to record accrued revenue reflect an understated asset and an _______ revenue. A Understated B Overstated
A Understated
Q 4.33: Net Income is transferred by crediting income summary and debiting retained earnings. A True B False
B False
Q 4.38: The adjusted trial balance is prepared after the preparation of the financial statements. A : True B : False
B : False
Q 4.39: Under the cash basis of accounting, when is revenue is recognized? A : when services have been performed B : when cash has been received C : before cash is received D : when a written promise to pay has been received
B : when cash has been received
Q 4.25: What is the first step in the accounting cycle? A : post to ledger accounts B : prepare a trial balance C : analyze business transactions D : journalize business transactions
C : analyze business transactions
Q 4.27: What is the purpose of adjusted trial balance? A : to show the financial position of company B : to show all the expenses incurred by the company during the current accounting period C : to prove the equality of all debit and credit balances after all adjustment D : to show the debtors' and creditors' balances
C : to prove the equality of all debit and credit balances after all adjustment
Q 4.35: Which of the following are required steps in the accounting cycle? Select all that apply. A) preparing an adjusted trial balance B) preparing a worksheet C) journalizing and posting closing entries D) preparing a post-closing trial balance
A) preparing an adjusted trial balance C) journalizing and posting closing entries D) preparing a post-closing trial balance
Q 4.31: Which of the following rules is used to compute net income? A : Revenue - Dividends B : Retained earnings + Dividends C : Revenue + Expenses D : Revenue - Expenses
D Revenue - Expenses
Q 4.26: A revenue-asset relationship exists with ________ revenue adjusting entries. A : net B : unearned C : earned D : accrued
D accrued
Q 4.32: Which of the following would justify a company using a cash basis of accounting? A : if it does not have accountants on staff B : if it makes extensive use of credit for sales and purchases C : if it has sales under $2,000,000 D : if it has few receivables or payables
D if it has few receivables or payables
Q 4.24: Which of the following will NOT be included in a post-closing trial balance? A : accounts receivable B : prepaid insurance C : retained earning D : revenue
D revenue
Q 4.30: How many steps in the accounting cycle involve preparing some kind of trial balance? A : two B : one C : none D : three
D three
Q 4.23: Which of the following statements is true? A : Temporary accounts appear on the post-closing trial balance. B : There are usually three closing journal entries. C : Closing entries summarize the activity in every account. D : Permanent accounts appear on the post-closing trial balance.
D : Permanent accounts appear on the post-closing trial balance.
