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The matching concept A. States that the revenues and related expenses should be reported in the same period B. Determines whether the normal balance of an account is a debit or credit C. Addresses the relationship between the journal and the balance sheet D. Requires that the dollar amount of debits equal the dollar amount of credits on a trial balance |
A. States that the revenues and related expenses should be reported in the same period |
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Using accrual accounting, revenue is recorded and reported only A. If cash is received after the services are rendered B. When the services are rendered without regard to when cash is received C. When cash is received at the time services are rendered D. When cash is received without regard to when the services are rendered |
B. When the services are rendered without regard to when cash is received |
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Using accrual accounting, expenses are recorded and reported only A. When they are incurred and paid at the same time B. When they are incurred, whether or not cash is paid C. If they are paid before they are incurred D. If they are paid after they are incurred |
B. When they are incurred, whether or not cash is paid |
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If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry? A. Decreases the balance of an stockholders’ equity account B. Increases the balance of a liability account C. Increases the balance of an asset account D. Decreases the balance of an expense account |
B. Increases the balance of a liability account |
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The statement of retained earnings should be prepared A. After the income statement and balance sheet B. Before the income statement and balance sheet C. Before the income statement and after the balance sheet D. After the income statement and before the balance sheet |
D. After the income statement and before the balance sheet |
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Balance sheet accounts A. Are called real accounts B. Represent amounts accumulated during a specific period of time C. Are not affected by adjustments D. Have zero balances after the closing entries have been posted |
A. Are called real accounts |
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On which financial statement will Income Summary be shown? A. Balance sheet B. Retained earnings statement C. Income statement D. No financial statement |
D. No financial statement |
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Which of the following is not true about closing entries? A. After the second closing entry, the income summary account is equal to the net income or loss for the period. B. By closing nominal accounts at the end of the period to zero, it is possible to isolate next period’s information correctly. C. There are four closing entries that update the stockholders’ equity account. D. All real accounts are closed at the end of the period. |
D. All real accounts are closed at the end of the period. |
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After posting the second closing entry to the income summary account, the balance will be equal to A. The net income or net loss for the period B. Revenues for the period C. Stockholders’ equity D. Zero |
A. The net income or net loss for the period |
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Which of the following account groups are nominal accounts? A. Rent Revenue, Fees Earned, Miscellaneous Expense B. Cash, Dividends, Wages Payable C. Common Stock, Dividends, Income Summary D. Prepaid Insurance, Equipment, Fees Earned |
A. Rent Revenue, Fees Earned, Miscellaneous Expense |
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There are four closing entries. The first one is to close revenues, the second one is to close expenses, the third one is to close ____, and the last one is to close the ____. A. Income Summary; common stock account B. Income Summary; assets C. Income Summary; dividends account D. Dividends account; Income Summary |
C. Income Summary; dividends account |
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Closing entries A. Need not be journalized if adjusting entries are prepared B. Need not be posted if the financial statements are prepared from the work sheet C. Are not needed if adjusting entries are prepared D. Must be journalized and posted |
D. Must be journalized and posted |
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Which of the accounts below would be closed by posting a debit to the account? A. Unearned Revenue B. Fees Earned C. Dividends D. Miscellaneous Expense |
B. Fees Earned |
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Which of the following accounts will not be closed to Income Summary at the end of the fiscal year? A. Insurance Expense B. Utilities Expense C. Prepaid Insurance D. Fees Earned |
C. Prepaid Insurance |
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Which of the following accounts will be closed to the retained earnings account at the end of the fiscal year? A. Income Summary B. Rent Expense C. Fees Earned D. Depreciation Expense |
A. Income Summary |
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Which of the following accounts ordinarily appears in the post-closing trial balance? A. Fees Earned B. Supplies Expense C. Unearned Rent D. Dividends |
C. Unearned Rent |
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The post-closing trial balance differs from the adjusted trial balance in that it does not A. Take into account adjusting entries B. Include income statement accounts C. Take into account closing entries D. Include balance sheet accounts |
B. Include income statement accounts |
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Calculator A. When they are incurred and paid at the same time B. When they are incurred, whether or not cash is paid C. If they are paid before they are incurred D. If they are paid after they are incurred |
B. When they are incurred, whether or not cash is paid |
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Prior to the adjusting process, accrued expenses have A. Been incurred, not paid, but have been recorded B. Been incurred, not paid, and not recorded C. Been paid but have not yet been incurred D. Not yet been incurred, paid, or recorded |
B. Been incurred, not paid, and not recorded |
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Deferred expenses is A. A cost not yet recorded as an expense and not yet paid. B. A cost recorded as an expense and paid. C. A cost recorded as an expense and not yet paid. D. A cost not yet recorded as an expense but has been paid. |
D. A cost not yet recorded as an expense but has been paid. |
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Deferred revenue is revenue that is A. Not earned and the cash has not been received B. Not earned but the cash has been received C. Earned and the cash has been received D. Earned but the cash has not been received |
B. Not earned but the cash has been received |
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Adjusting entries are A. Rarely needed in large companies B. The same as correcting entries C. Needed to bring accounts up to date and match revenue and expense D. Optional under generally accepted accounting principles |
C. Needed to bring accounts up to date and match revenue and expense |
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Adjusting entries affect at least one A. Revenue and the dividends account B. Asset and one stockholders’ equity account C. Income statement account and one balance sheet account D. Revenue and one stockholders’ equity account |
… |
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Which of the following is an example of accrued revenue? A. An agreement that has been signed for snow removal services for the next three months B. Snow removal services that have been paid for three months in advance C. Snow removal services that has been provided and paid on the same day D. Snow removal services that have been provided but have not been billed or paid |
D. Snow removal services that have been provided but have not been billed or paid |
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Which of the following is considered to be an accrued expense? A. A computer technician has installed the latest software updates, but you have not received an invoice or made payment B. A computer technician has been paid in advance to install software updates as they become available C. A computer technician has installed the latest software updates and was paid on the same day D. A computer technician has just signed an agreement with you regarding pricing for future work |
A. A computer technician has installed the latest software updates, but you have not received an invoice or made payment |
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If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n) A. Accrual B. Revenue C. Deferral D. Liability |
C. Deferral |
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Which account would normally not require an adjusting entry? A. Wages Expense B. Accumulated Depreciation C. Accounts Receivable D. Cash |
D. Cash |
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The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed A. Contra asset B. Historical cost C. Book value D. Market value |
C. Book value |
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Accumulated Depreciation and Depreciation Expense are classified, respectively, as A. Asset, contra liability B. Expense, contra asset C. contra asset, expense D. Revenue, asset |
C. contra asset, expense |
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The type of account and normal balance of Unearned Consulting Fees is A. Expense, debit B. Liability, credit C. Revenue, credit D. Liability, debit |
… |
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Accrued expenses are ordinarily reported on the balance sheet as A. Liabilities B. Prepaid expenses C. Assets D. Fixed assets |
A. Liabilities |
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What effect will the following adjusting journal entry have on the accounting records? Depreciation Expense 2,150 A. Decrease net book value B. Increase revenues C. Decrease expenses D. Increase net income |
A. Decrease net book value |
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Which of the following is not true regarding depreciation? A. Depreciation expense does not measure changes in market value. B. Depreciation allocates the cost of a fixed asset over its estimated life. C. Depreciation is an allocation not a valuation method. D. Depreciation expense reflects the decrease in market value each year. |
D. Depreciation expense reflects the decrease in market value each year. |
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For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income? A. Expenses are overstated by $6,500 B. Revenues are overstated by $4,200 C. Net income is overstated by $2,300 D. Expenses are understated by $3,500 |
C. Net income is overstated by $2,300 |
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A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The last payday of December is Friday, December 27. Assume the next pay period begins on Monday, December 30 and the proper adjusting entry is journalized at the end of the fiscal period (December 31). The entry for the payment of the payroll on Friday, January 10 includes a A. Debit to Salary Expense of $16,000 B. Debit to Salary Expense of $4,000 C. Credit to Salary Payable of $16,000 D. Credit to Salary Payable of $4,000 |
A. Debit to Salary Expense of $16,000 |
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At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted. Which of the following statements is true? A. Insurance expense will be overstated. B. Net income for the year will be overstated. C. Stockholders’ equity at the end of the year will be understated. D. Total assets at the end of the year will be understated. |
B. Net income for the year will be overstated. |
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Buster Industries pays weekly salaries of $25,354 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is A. Debit Dividends, $10,142; credit Cash, $10,142 B. Debit Salary Expense, $10,142; credit Salaries Payable, $10,142 C. Debit Salary Expense, $10,142; credit Dividends, $10,142 D. Debit Salaries Payable, $10,142; credit Cash, $10,142 |
B. Debit Salary Expense, $10,142; credit Salaries Payable, $10,142 |
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The net income reported on the income statement is $89,059. However, adjusting entries have not been made at the end of the period for supplies expense of $2,144 and accrued salaries of $1,441. Net income, as corrected, is A. $87,618 B. $89,059 C. $86,915 D. $85,474 |
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Using accrual accounting revenue is recorded and reported only |
When the services are rendered without regard to when cash is received |
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Using accrual accounting, expenses are recorded and reported only |
When they are incurred, whether or not cash is paid |
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Unearned revenue is what type of an account? |
Liability |
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Accrued revenues would appear on the balance sheet as |
Assets |
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Depreciation Expense and Accumulated Depreciation are classified, respectively, as |
Expense and Contra asset |
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Accrued expenses are ordinarily reported on the balance sheet as |
liabilities |
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__________ is/are created when a revenue or expense has NOT been recorded by the end of the accounting period. |
Accruals |
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The general term employed to indicate an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is |
Accrual |
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