Term
| Accrual accounting records revenue only when it is earned |
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Definition
Which of the following is true of accrual basis accounting and cash basis accounting?
A) accrual accounting records revenue only when it is earned
B) accrual accounting is not allowed under GAAP
C) Cash basis accounting records all transactions
D) all of the above |
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Term
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Definition
ABC gains a client who prepays $540 for a package of six physical training sessions. ABC collects the $540 in advance and will provide the training later. After four training sessions, what should ABC report on its income statement assuming is uses accrual basis accounting method.
A) Service revenue of $360
B) Service revenue of $540
C) Unearned revenue of $360
D) Cash of $180 |
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Term
| Revenue to be recorded only after the business has earned it |
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Definition
The revenue recognition principle requires
A) time to be divided into annual periods to measure revenue properly
B) revenue to be recorded only after the business has earned it
C) expenses to be matched with revenue of the period
D) revenue to be recored only after the cash is received |
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Term
| Updating the accounts at the end of the period |
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Definition
Adjusting the accounts is the process of
A) subtracting expenses from revenues to measure net income
B) recording transactions as they occur during the period
C) updating the accounts at the end of the period
D) zeroing out account balances to prepare for the next period |
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Term
| Recording the usage of office supplies during the period |
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Definition
| Which of the following is an example of a deferral adjusting entry? |
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