question

The time period assumption is often referred to as the matching principle

answer

false

question

expense recognition often follows revenue recognition

answer

True

question

adjusting entries are not necessary if the trial balance debit and credit columns balances are equal

answer

false

question

An adjusting entry always involves two balance sheet accounts

answer

false

question

accrued revenues are revenues which have been received but not yet earned

answer

false

question

the cost of a depreciable asset less accumulated depreciation reflects the book value of the asset

answer

true

question

accumulated depreciation is a liability account and has a credit normal account balance

answer

false

question

the balances of the depreciation expense and the accumulated depreciation accounts should always be the same

answer

false

question

acures revenues are revenues that have been earned and received before financial statements have been prepared

answer

false

question

rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned

answer

true

question

management usually desires ______ financial statements and the IRS requires all businesses to file ______ tax returns

answer

monthly, annual

question

in general, the shorter the time period, the difficulty of making the proper adjustments to accounts

answer

is increased

question

the fiscal year of a business is usually determined by

answer

the business

question

the revenue recognition principle dictates that revenue should be recognized in the accounting records

answer

when it is earned

question

in a service-type business, revenue is considered earned

answer

when the service is performed

question

a company spends $2 million dollars to build a restaurant. over what period should the cost be written off?

answer

over the useful life of the building

question

a catering company supplies food for a large event for $20,000 on October 30. the customer is sent a statement on November 5 and a check is received on November 10.The catering company follows GAAP and applies the revenue recognition principle. When is the $20,000 considered to be earned?

answer

October 30

question

Under the accrual basis of accounting

answer

events that change a company financial statements are recognized in the period they occur rather than in the period in which cash is paid or received

question

Accounts often need to be adjusted because

answer

many transactions affect more than one time period

question

an adjusting entry

answer

affects a balance sheet account and an income statement account

question

arnold's asian restaurant company purchased office supplies costing $5,000 and debited office supplies for the full amount. at the end of the accounting period, a physical count of office supplies revealed $1,500 still on hand. the appropriate adjusting journal entry to be made at the end of the period would be.

answer

debit office supplies expense, $3,500; Credit office supplies, $3500

question

accrued revenues are

answer

earned but not yet received or recorded

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prepaid expenses are

answer

paid and recorded in an asset account before they are used or consumed

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accrued expenses are

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incurred but not yet paid or recorded

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unearned revenues are

answer

received and recorded as liabilities before they are earned

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while of the following reflect the balances of prepayment accounts prior to adjustment?

answer

balance sheet accounts are overstated and income statement accounts are understated

question

the latin restaurant purchased $5,000 worth of laundry supplies on July 2and recorded the purchase as an asset. on June 30, an inventory of the laundry supplies indicated only $2,000 on hand. the adjusting entry that should be made by the hotel on July 30 is

answer

debit laundry supplies expense, $3,000; credit laundry supplies, $3,000

question

Depreciation expense for a period is computed by taking the

answer

cost of the asset / useful life

question

accumulated depreciation is a(n)

answer

liability account

question

the rose bakery purchased a computer for $4,000 on December 1, it is estimated that annual depreciation on the computer will be $800. if financial statements are to be prepared on December 31,the company should make the following adjusting entry

answer

debit depreciation expense, $67; credit accumulated depreciation $67

question

brown management received a check for $24,000 on July , which represents a 12-month advance payment of rent on a restaurant it rents to a client. unearned rent was credited for the full $24,000. if financial statements are to be prepared on December 3, the compant should make the following adjusting entry:

answer

debit unearned rent, $2,000; credit rent revenure, $2,000

question

depreciation is the process of

answer

allocating the cost of an asset to expense over its useful life in a rational and systematic manner

question

A new accountant working for Frenchies Catering Company records $1,000 Depreciation Expense on service equipment as follows: Dr. Depreciation Expense 1,000 Cr. Cash 1,000 The effect of this entry is to

answer

overstate the book value of the depreciable assets at December 31

question

The accounts of a business before an adjusting entry is made to record an accrued revenue reflect an

answer

understated asset and an understated revenue

question

Teresa White has performed $900 of CPA services for a country club but has not billed the club as of the end of the accounting period. What adjusting entry must Teresa make?

answer

Debit Accounts Receivable and credit Service Revenue

question

A gift shop, located in a hotel, signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $60,000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?

answer

Interest Expense 1,200 Interest Payable 1,200

question

Rhapsody Red Restaurant shows a balance in Salaries Payable of $20,000 at the end of the month. The next payroll amounting to $30,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?

answer

Salaries Expense 10,000 Salaries Payable 20,000 Cash 30,000

question

An adjusted trial balance

answer

proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made

question

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause

answer

assets to be understated.

question

If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

answer

revenues to be overstated

question

The ______________ assumption states that the economic life of a business can be divided into artificial time periods.

answer

time period

question

An accounting period that is one year in length is referred to as a ______________ year.

answer

fiscal

question

In a service company, revenue is earned when the service is _______________.

answer

performed

question

Expenses paid and recorded in an asset account before they are used or consumed are called _______________. Revenue received and recorded as a liability before it is earned is referred to as _________________.

answer

prepaid expenses, unearned revenue

question

Failure to adjust a prepaid expense account for the amount expired will cause _______________ to be understated and ________________ to be overstated.

answer

expenses, assets

question

A twelve-month accounting period

answer

fiscal year

question

Expenses paid before they are incurred

answer

prepaid expenses

question

Cost less accumulated depreciation

answer

Book Value

question

Divides the economic life of a business into artificial time periods

answer

Time period Assumption

question

Efforts are related to accomplishments

answer

matching principle

question

A contra asset account

answer

Accumulated Depreciation

question

Recognition of revenue when it is recorded when earned

answer

revenue recognition principle

question

Revenues earned but not yet received

answer

accrued revenues

question

Expenses incurred but not yet paid

answer

accrued expenses

question

A cost allocation process

answer

depreciation

Financial Accounting Chp. 4 – Flashcards

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