Question 1

Since some costs are not recorded, adjusting entries are necessary.

Accepted Answer

A) True 
 B)False

Question 2

Which trial balance, if any, is used to prepare financial statements?

Accepted Answer

A) Adjusted trial balance 
B) Post-closing trial balance 
C) Unadjusted trial balance 
D) none 
A) Adjusted trial balance 
B) Post-closing trial balance 
C) Unadjusted trial balance 
D) none

Question 3

The cash basis of accounting is:

Accepted Answer

A) permitted under both IFRS and ASPE. 
B) permitted under IFRS but not ASPE. 
C) not permitted under IFRS but permitted under ASPE. 
D) not permitted under either IFRS and ASPE. 
A) permitted under both IFRS and ASPE. 
B) permitted under IFRS but not ASPE. 
C) not permitted under IFRS but permitted under ASPE. 
D) not permitted under either IFRS and ASPE.

Question 4

Under the cash basis of accounting, expense recognition generally does not follow revenue recognition.

Accepted Answer

A) True 
 B)False

Question 5

The Income Summary account is a permanent account.

Accepted Answer

A) True 
 B)False

Question 6

Expense recognition is tied to changes in assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 7

At December 31, 2022, before any year-end adjustments, TBS Corp.'s Insurance Expense account had a balance of $800 and its Prepaid Insurance account had a balance of $3,400.It was determined that $1,650 of the Prepaid Insurance had expired.The adjusted balance for Insurance Expense for the year would be

Accepted Answer

A) $2,450. 
B) $1,650. 
C) $1,975. 
D) $ 800. 
A) $2,450. 
B) $1,650. 
C) $1,975. 
D) $ 800.

Question 8

Deferred revenue is classified as a(n)

Accepted Answer

A) asset account. 
B) revenue account. 
C) equity account. 
D) liability. 
A) asset account. 
B) revenue account. 
C) equity account. 
D) liability.

Question 9

Ray Autobody purchased a car jack for $16,000 on July 1.The estimated useful life of the car jack is 4 years.If the financial statements are prepared on December 31, Ray should make the following adjusting journal entry, assuming adjusting entries are made only annually:

Accepted Answer

A) debit Depreciation Expense, $2,000, credit Accumulated Depreciation-Equipment, $2,000. 
B) debit Depreciation Expense, $1,667, credit Accumulated Depreciation-Equipment, $1,667. 
C) debit Depreciation Expense, $4,000, credit Accumulated Depreciation-Equipment, $4,000. 
D) debit Equipment, $2,000, credit Accumulated Depreciation-Equipment, $2,000. 
A) debit Depreciation Expense, $2,000, credit Accumulated Depreciation-Equipment, $2,000. 
B) debit Depreciation Expense, $1,667, credit Accumulated Depreciation-Equipment, $1,667. 
C) debit Depreciation Expense, $4,000, credit Accumulated Depreciation-Equipment, $4,000. 
D) debit Equipment, $2,000, credit Accumulated Depreciation-Equipment, $2,000.

Question 10

The closing entry process consists of closing

Accepted Answer

A) all asset and liability accounts. 
B) the Retained Earnings account. 
C) all permanent accounts. 
D) all temporary accounts. 
A) all asset and liability accounts. 
B) the Retained Earnings account. 
C) all permanent accounts. 
D) all temporary accounts.

Question 11

Some accounts need to be adjusted because

Accepted Answer

A) there are never enough accounts to record all the transactions. 
B) they are not up to date at the time financial statements are prepared. 
C) there are always errors made in recording transactions. 
D) management can't decide what they want to report. 
A) there are never enough accounts to record all the transactions. 
B) they are not up to date at the time financial statements are prepared. 
C) there are always errors made in recording transactions. 
D) management can't decide what they want to report.

Question 12

When preparing the statement of financial position, the balance of Retained Earnings is taken from the Adjusted Trial Balance.

Accepted Answer

A) True 
 B)False

Question 13

Expenses paid before being used or consumed are initially recorded as liabilities.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following accounts would not likely need to be adjusted at year end?

Accepted Answer

A) Supplies 
B) Equipment 
C) Prepaid Insurance 
D) Unearned Revenue 
A) Supplies 
B) Equipment 
C) Prepaid Insurance 
D) Unearned Revenue

Question 15

If XYZ Corp.fails to adjust the Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Accepted Answer

A) This will have no effect on the financial statements. 
B) Expenses will be overstated and net income and shareholders' equity will be understated. 
C) Assets will be overstated and net income and shareholders' equity will be understated. 
D) Assets will be overstated and net income and shareholders' equity will be overstated. 
A) This will have no effect on the financial statements. 
B) Expenses will be overstated and net income and shareholders' equity will be understated. 
C) Assets will be overstated and net income and shareholders' equity will be understated. 
D) Assets will be overstated and net income and shareholders' equity will be overstated.

Question 16

C.Credit Inc.has billed its clients for services performed in October.In November, the company receives payments from the clients.What entry will it make upon receipt of the payments?

Accepted Answer

A) debit Deferred Revenue and credit Service Revenue 
B) debit Cash and credit Accounts Receivable 
C) debit Accounts Receivable and credit Service Revenue 
D) debit Cash and credit Service Revenue 
A) debit Deferred Revenue and credit Service Revenue 
B) debit Cash and credit Accounts Receivable 
C) debit Accounts Receivable and credit Service Revenue 
D) debit Cash and credit Service Revenue

Question 17

The cost of any depreciable asset less accumulated depreciation reflects the carrying amount of the asset.

Accepted Answer

A) True 
 B)False

Question 18

The purchase of certain types of long-lived (non-current) assets is essentially a long-term prepayment for services.

Accepted Answer

A) True 
 B)False

Question 19

Under the cash basis of accounting, revenue is only recognized when cash is received.

Accepted Answer

A) True 
 B)False

Question 20

Which one of the following is not a justification for adjusting entries?

Accepted Answer

A) Adjusting entries are necessary to ensure that revenue recognition criteria are followed. 
B) Adjusting entries are necessary to ensure that expense recognition criteria are followed. 
C) Adjusting entries are necessary to enable financial statements to be in conformity with IFRS or ASPE. 
D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget. 
A) Adjusting entries are necessary to ensure that revenue recognition criteria are followed. 
B) Adjusting entries are necessary to ensure that expense recognition criteria are followed. 
C) Adjusting entries are necessary to enable financial statements to be in conformity with IFRS or ASPE. 
D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Since some costs are not recorded, adjusting entries are necessary.

Which trial balance, if any, is used to prepare financial statements?

The cash basis of accounting is:

Under the cash basis of accounting, expense recognition generally does not follow revenue recognition.

The Income Summary account is a permanent account.

Expense recognition is tied to changes in assets and liabilities.

Deferred revenue is classified as a(n)

Ray Autobody purchased a car jack for $16,000 on July 1.The estimated useful life of the car jack is 4 years.If the financial statements are prepared on December 31, Ray should make the following adjusting journal entry, assuming adjusting entries are made only annually:

The closing entry process consists of closing

Some accounts need to be adjusted because

When preparing the statement of financial position, the balance of Retained Earnings is taken from the Adjusted Trial Balance.

Expenses paid before being used or consumed are initially recorded as liabilities.

Which of the following accounts would not likely need to be adjusted at year end?

If XYZ Corp.fails to adjust the Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

C.Credit Inc.has billed its clients for services performed in October.In November, the company receives payments from the clients.What entry will it make upon receipt of the payments?

The cost of any depreciable asset less accumulated depreciation reflects the carrying amount of the asset.

The purchase of certain types of long-lived (non-current) assets is essentially a long-term prepayment for services.

Under the cash basis of accounting, revenue is only recognized when cash is received.

Which one of the following is not a justification for adjusting entries?

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters

Exam 4: Accrual Accounting Concepts

Since some costs are not recorded, adjusting entries are necessary.

Which trial balance, if any, is used to prepare financial statements?

The cash basis of accounting is:

Under the cash basis of accounting, expense recognition generally does not follow revenue recognition.

The Income Summary account is a permanent account.

Expense recognition is tied to changes in assets and liabilities.

Deferred revenue is classified as a(n)

Ray Autobody purchased a car jack for $16,000 on July 1.The estimated useful life of the car jack is 4 years.If the financial statements are prepared on December 31, Ray should make the following adjusting journal entry, assuming adjusting entries are made only annually:

The closing entry process consists of closing

Some accounts need to be adjusted because

When preparing the statement of financial position, the balance of Retained Earnings is taken from the Adjusted Trial Balance.

Expenses paid before being used or consumed are initially recorded as liabilities.

Which of the following accounts would not likely need to be adjusted at year end?

If XYZ Corp.fails to adjust the Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

C.Credit Inc.has billed its clients for services performed in October.In November, the company receives payments from the clients.What entry will it make upon receipt of the payments?

The cost of any depreciable asset less accumulated depreciation reflects the carrying amount of the asset.

The purchase of certain types of long-lived (non-current) assets is essentially a long-term prepayment for services.

Under the cash basis of accounting, revenue is only recognized when cash is received.

Which one of the following is not a justification for adjusting entries?

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters