Question 1. Depreciation Expense and Accumulated Depreciation are classified, respectively, as
expense and contra asset
asset and contra liability
revenue and asset
contra asset and expense
Question 2. Which type(s) of adjustments are the financial statements affected by?
Deferrals
Accruals
Both deferrals and accruals
Neither deferrals nor accruals
Question 3. Accumulated depreciation is __________ to get the carrying value.
added to equipment
subtracted from equipment
added to accounts payable
subtracted from accounts payable
Question 4. The accounting equation is the basis for analyzing, summarizing, and recording transactions in accounting. The accounting equation is:
Assets =Liabilities
Assets = Liabilities + Stockholders Equity
Liabilities = Assets + Stockholders Equity
Stockholders Equity = Liabilities + Assets
Question 5. Accrual accounting records revenue when:
Earned
Cash is received
Products are completed
Salaries are paid
Question 6. On the balance sheet, Accrued expenses are ordinarily reported as:
Fixed assets
Prepaid expenses
Assets
Liabilities
Question 7. What are the four timing differences between recognizing revenues and expenses between accrual basis and cash basis accounting?
Accrued revenue, accrued expenses, deferred revenue, deferred expenses
Cash, revenue, expenses and liabilities
Accounts receivable, accounts payable, long term liabilities, intangible assets
Revenue, expenses, assets, retained earnings
Question 8. When cash is received in payment of an account receivable, which section of the Statement of Cash Flows is affected?
Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Flow from Financing Activities
There is no effect on the Statement of Cash Flows.
Question 9. After recording transactions for the accounting period, which financial statement does a company prepares statement first?
Income statement
Balance sheet
Retained earnings statement
Statement of cash flows
Question 10. X&M Co. provided services of $2,000,000 to clients on account. How does this transaction affect A&M's accounts?
Increase accounts receivable and cash by $2,000,000 each
Increase accounts receivable and unearned revenues by $2,000,000 each
Increase cash and decrease accounts receivable by $2,000,000 each
Increase accounts receivable and revenues by $2,000,000 each
Question 11. Cash receipts from interest and dividends are classified as
investing activities
operating activities
either financing or investing activities
financing activities
Question 12. ___________ is an example of a deferred expense.
Unearned revenue
Accounts payable
Prepaid advertising
Accounts receivable
Question 13. Using accrual accounting, expenses are recorded and reported only
When they are incurred and paid at the same time
When they are incurred, whether or not cash is paid
If they are paid before they are incurred
If they are paid after they are incurred
Question 14. Which of the following is an example of a deferred expense?
Prepaid advertising
Unearned revenue
Accounts payable
Accounts receivable
Question 15. Which transaction would be recorded in a cash basis system of accounting?
Purchase of equipment on credit
Purchase of supplies on credit
Sale of goods on credit
Sale of goods for cash
Question 16. Accrued revenues would appear on the balance sheet as
assets
liabilities
stockholders' equity
prepaid expenses
Question 17. Using accrual accounting, expenses are recorded and reported only when they are incurred, whether or not cash is paid, under the cash basis expenses are recorded:
When they are incurred and paid at the same time
If they are paid before they are incurred
If they are paid after they are incurred
When they are paid
Question 18. When preparing an adjustment under accrual accounting, what would be the proper amount of the adjusting entry if the end of the period balance in the supply account is $4,000 and the amount of supplies on hand is $1650?
3,350
2,350
3,050
5,650
Question 19. __________ is/are created when a revenue or expense has NOT been recorded by the end of the accounting period.
Prepaid advertising
Premiums received in advance
Unearned revenue
Accruals
Question 20. If prepaid insurance expires over time, this asset account becomes a (n)
liability
another asset
revenue
expense