Question 1

Accounting for revenue on a cash basis means that no entry of revenue is made in the account until the cash is received for the services performed.

Accepted Answer

Accounting for revenue on a cash basis means that revenue is only recognized when cash is received, therefore no entry is made in the revenue account until the cash is actually received for the services performed.

Question 2

"Adjusting" is written in the Item column of the general ledger when posting adjusting entries.

Accepted Answer

This statement is true. "Adjusting" is typically written in the Item column of the general ledger when posting adjusting journal entries at the end of an accounting period. This helps to differentiate these entries from regular transactions and highlights that they are adjusting the accounts to reflect the correct balances at the end of the period.

Question 3

A contra-asset is deducted from the related asset on the balance sheet.

Accepted Answer

A contra-asset is a negative asset account that offsets the balance of the related asset account on the balance sheet. Therefore, it is deducted from the related asset.

Question 4

The matching of assets and expenses of a business on a periodic basis is referred to as the matching concept.

Accepted Answer

The answer of The matching of assets and expenses of...

Question 5

A contra-asset has a debit balance.

Accepted Answer

A contra-asset account typically has a credit balance, which offsets the debit balance of the associated asset account.

Question 6

Adjusting entries affect only the owner's equity accounts.

Accepted Answer

Adjusting entries affect both the income statement accounts and the balance sheet accounts, not just the owner's equity accounts.

Question 7

The book value of a plant asset is determined by subtracting the accumulated depreciation from the cost of the plant asset.

Accepted Answer

This is the correct definition of book value for a plant asset.

Question 8

If the total credits exceed total debits in the Income Statement columns of the work sheet, the business has had a net loss.

Accepted Answer

If the total credits exceed total debits in the Income Statement columns of the work sheet, the business has had a net income. If total debits exceed total credits, the business has had a net loss.

Question 9

A manual work sheet is usually prepared in pencil.

Accepted Answer

Manual work sheets are usually prepared in pencil so that changes can be easily made and mistakes can be easily corrected.

Question 10

Under the modified cash basis of accounting, adjustments are made only for prepaid items and depreciation on plant and equipment.

Accepted Answer

Under modified cash basis of accounting, adjustments for prepaid items and depreciation on plant and equipment are made, but not for accruals or accounts receivable/payable.

Question 11

A contra-asset appears on the income statement.

Accepted Answer

Contra-asset accounts appear on the balance sheet, not the income statement.

Question 12

When an account balance is not affected by an adjusting entry, the amount shown in the Trial Balance columns is extended directly to the Adjusted Trial Balance columns.

Accepted Answer

If an account balance is not affected by an adjusting entry, it means that the balance was already properly stated in the unadjusted trial balance. Therefore, it can be directly transferred to the adjusted trial balance columns without any adjustment needed.

Question 13

The income statement reports earnings on a specific date.

Accepted Answer

The income statement reports earnings over a specific period of time, not on a specific date. It summarizes revenues and expenses for a specific accounting period (such as a month or a year) to determine the net income or loss.

Question 14

A fiscal year is always the same as the calendar year.

Accepted Answer

A fiscal year can start on any date chosen by a company, organization or government for the purpose of financial reporting and tax purposes. It may or may not coincide with the calendar year.

Question 15

Under the modified cash basis of accounting, cash payments for assets with lives longer than one accounting period (buildings, equipment, insurance, etc.) are recorded as assets and adjustments are made each period.

Accepted Answer

This is correct. Under the modified cash basis of accounting, such payments are recorded as assets and adjusted each period. This is different from the pure cash basis of accounting where all transactions are recorded only when cash is paid or received.

Question 16

The cost of plant assets less the accumulated depreciation is called the salvage value of the asset.

Accepted Answer

The cost of plant assets less the accumulated depreciation is called the book value or carrying value of the asset, not the salvage value. Salvage value is the estimated amount that an asset is worth at the end of its useful life.

Question 17

The original cost of an asset less the trade-in or salvage value of an asset equals the depreciable cost of that asset.

Accepted Answer

This statement is true. Depreciable cost is the amount of the asset's cost that can be depreciated over its useful life, and it is calculated by subtracting the trade-in or salvage value from the original cost of the asset.

Question 18

The matching principle offers the best measure of net income.

Accepted Answer

The matching principle is a fundamental concept in accounting that states expenses should be recognized in the same period as the revenues they helped to generate, providing a more accurate measure of net income. Therefore, the matching principle does offer the best measure of net income.

Question 19

A 12-month fiscal year can end any month of the calendar year.

Accepted Answer

A fiscal year can be any 12-month period that a company or organization chooses, and it does not have to coincide with the calendar year. Therefore, it can end in any month of the year.

Question 20

Depreciable cost is the amount of depreciation expense recorded for each accounting period.

Accepted Answer

Depreciable cost is the cost of an asset that is allocated over its useful life, resulting in the depreciation expense recorded each accounting period.

Quiz 5: Adjusting Entries and the Work Sheet