Question 1

Items for which we have received payment,but have not yet delivered the service,are called:
A)referrals.
B)deferrals.
C)accruals.
D)non-cash items.

Accepted Answer

Deferrals refer to goods or services for which payment has been received but the delivery or completion of the service or goods has not yet occurred. Therefore, B is the correct answer as it describes the situation given in the question. A, C, and D are not correct as they do not accurately describe this specific situation.

Question 2

If Blue company records expenses in the time period when incurred,they are using the:
A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)expense basis of accounting.

Accepted Answer

The accrual basis of accounting records expenses when they are incurred, regardless of when payment is made. This method provides a more accurate representation of the company's financial position and performance. The cash basis of accounting only records expenses when payment is made, which can result in misleading financial statements. The adjustment basis and expense basis of accounting are not commonly used methods.

Question 3

GAAP requires the use of accrual accounting.

Accepted Answer

GAAP (Generally Accepted Accounting Principles) requires the use of accrual accounting, which records revenues and expenses when they are earned or incurred, rather than when cash is received or paid. This is in contrast to cash basis accounting, which records transactions only when cash is exchanged. Accrual accounting provides a more accurate and complete picture of a company's financial performance and position over time.

Question 4

The matching principle in accounting requires the matching of:
A)revenue earned with the assets used to produce the revenue.
B)revenue earned with the assets used less the liabilities incurred.
C)revenue earned with the liabilities used to produce the revenue.
D)revenue earned with the expenses incurred to produce the revenue.

Accepted Answer

The matching principle in accounting requires the revenue earned to be matched with the expenses incurred to produce that revenue. This means that expenses should be recognized in the same period that the related revenue is recognized, in order to accurately reflect the true profitability of a business. Choice A and C are incorrect as they do not account for expenses, and choice B is incorrect as it subtracts liabilities from the assets used to generate revenue, which is not accurate.

Question 5

Under accrual accounting,the most important GAAP concepts to remember are the recognition principle for expenses and the matching principle for revenues.

Accepted Answer

Under accrual accounting, the most important GAAP concepts to remember are the revenue recognition principle for revenues and the matching principle for expenses.

Question 6

If Bloom company records revenue when cash is received,they are using the:
A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)expense basis of accounting.

Accepted Answer

Bloom company records revenue when cash is received, which is the basic principle of the cash basis of accounting.

Question 7

A period of time,such as a month or quarter,could be considered a(n):
A)fiscal year.
B)accounting period.
C)revenue period.
D)income period.

Accepted Answer

A period of time used for accounting purposes, such as a month or quarter, is typically referred to as an accounting period. The other options are not commonly used terms to describe a period of time for accounting or financial purposes.

Question 8

It is necessary to post:
A)asset and liability entries.
B)revenue and expense entries.
C)adjusting entries.
D)all journal entries.

Accepted Answer

All journal entries must be posted to the ledger to ensure accurate financial records and reporting.

Question 9

Part of accrual accounting depends upon recording ________ entries at the end of the fiscal year.
A)expense
B)revenue
C)adjusting
D)debit

Accepted Answer

Accrual accounting requires adjusting entries to be made at the end of the fiscal year to ensure that all revenues and expenses are properly recognized in the correct period. These entries typically involve adjusting accounts for items such as prepaid expenses, accrued revenue, and accrued expenses. Therefore, the correct answer is C) adjusting.

Question 10

At the end of the period,which is prepared first?
A)Income Statement
B)Balance sheet
C)Adjusting entries
D)Unadjusted trial balance

Accepted Answer

The unadjusted trial balance is prepared first to ensure that total debits equal total credits before making any adjusting entries.

Question 11

If revenues are recognized and recorded when earned,the company is using the:
A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)the expense basis of accounting.

Accepted Answer

The accrual basis of accounting recognizes revenues when earned and expenses when incurred, regardless of cash flow. This is different from the cash basis of accounting, where revenues and expenses are recognized only when cash is received or paid, respectively. The adjustment basis and expense basis of accounting are not widely recognized accounting methods.

Question 12

Accounting for revenue on an accrual basis means that no entry of revenue is made until the cash is actually received.

Accepted Answer

Accounting for revenue on an accrual basis means that revenue is recognized when earned, regardless of when cash is received.

Question 13

The type of accounting required by GAAP is:
A)modified cash.
B)hybrid cash.
C)cash.
D)accrual.

Accepted Answer

GAAP requires accrual accounting, which recognizes revenue and expenses when they are earned or incurred, regardless of when cash is actually received or paid out. This provides a more accurate picture of a company's financial performance and position.

Question 14

Because inventories are high,Wal-Mart should end its fiscal year in either November or December.

Accepted Answer

The timing of a fiscal year end is a strategic decision and not solely based on inventory levels. Wal-Mart's fiscal year traditionally ends in January to align with the retail cycle and holiday sales.

Question 15

It does not matter when a fiscal year starts as long as it is twelve consecutive months long.

Accepted Answer

A fiscal year can start on any date as long as it is twelve consecutive months. It is up to the organization or government to determine the start date of their fiscal year based on their needs and preferences.

Question 16

Item costs that have been incurred,but not yet paid,are called:
A)referrals.
B)deferrals.
C)accruals.
D)non-cash items.

Accepted Answer

These costs are called accruals, as they are expenses that have been recognized but not yet paid. Referrals are when a customer is directed to another business, deferrals are when revenues or expenses are postponed to a later accounting period, and non-cash items are items that do not involve actual cash flow, such as depreciation.

Question 17

The majority of businesses normally end their fiscal year on:
A)June 30.
B)September 30.
C)December 31.
D)some other date.

Accepted Answer

December 31 is the most common date for the end of a fiscal year for businesses because it aligns with the end of the calendar year and makes tax preparation and reporting easier.

Question 18

If a business records expenses when paid,the company is using the:
A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)the expense basis of accounting.

Accepted Answer

The cash basis of accounting records transactions when cash is exchanged. Therefore, expenses are recorded when they are actually paid, rather than when they are incurred.

Question 19

Accounts Receivable and Accounts Payable are examples of accruals.

Accepted Answer

Accounts Receivable and Accounts Payable are both examples of accruals, which are transactions that do not involve the exchange of cash at the time they are recorded. Accounts Receivable represents money that a company is owed by its customers for goods or services that have been sold but not yet paid for, while Accounts Payable represents money that a company owes to its suppliers for goods or services that have been received but not yet paid for.

Question 20

Recording office supplies as an asset after paying for them would be considered a deferral.

Accepted Answer

Recording office supplies as an asset after paying for them is considered a deferral because the payment for the supplies has been made in advance, and the supplies will be used up over time. As the supplies are used, their value will be transferred from the assets account to an expense account.

Quiz 3: Adjusting and Closing Entries

Items for which we have received payment,but have not yet delivered the service,are called:

If Blue company records expenses in the time period when incurred,they are using the:

GAAP requires the use of accrual accounting.

The matching principle in accounting requires the matching of:

Under accrual accounting,the most important GAAP concepts to remember are the recognition principle for expenses and the matching principle for revenues.

If Bloom company records revenue when cash is received,they are using the:

A period of time,such as a month or quarter,could be considered a(n) :

It is necessary to post:

Part of accrual accounting depends upon recording ________ entries at the end of the fiscal year.

At the end of the period,which is prepared first?

If revenues are recognized and recorded when earned,the company is using the:

Accounting for revenue on an accrual basis means that no entry of revenue is made until the cash is actually received.

The type of accounting required by GAAP is:

Because inventories are high,Wal-Mart should end its fiscal year in either November or December.

It does not matter when a fiscal year starts as long as it is twelve consecutive months long.

Item costs that have been incurred,but not yet paid,are called:

The majority of businesses normally end their fiscal year on:

If a business records expenses when paid,the company is using the:

Accounts Receivable and Accounts Payable are examples of accruals.

Recording office supplies as an asset after paying for them would be considered a deferral.