Accounts periods and basics concepts - Multiple Choice questions.

1.  Which of the following is not generally an accounting time period?

a.         A week

b.        A month

c.         A quarter

d.        A year

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

a.         when cash is received.

b.        when it is earned.

c.         at the end of the month.

d.        in the period that income taxes are paid.

3.   The matching principle matches

a.         customers with businesses.

b.        expenses with revenues.

c.         assets with liabilities.

d.        creditors with businesses.

4.  Javier's Tune-Up Shop follows the revenue recognition principle. Javier services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Javier on September 5. Javier receives the check in the mail on September 6. When should Javier show that the revenue was earned?

a.         August 31

b.        August 1

c.         September 5

d.        September 6

5.   Under the accrual basis of accounting

a.         cash must be received before revenue is recognized.

b.        net income is calculated by matching cash outflows against cash inflows.

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

d.        the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

6.  Using accrual accounting, expenses are recorded and reported only

a.         when they are incurred whether or not cash is paid.

b.        when they are incurred and paid at the same time.

c.         if they are paid before they are incurred.

d.        if they are paid after they are incurred.

7.   Which statement is correct?

a.         As long as a company consistently uses the cash basis of accounting, generally accepted accounting principles allow its use.

b.        The use of the cash basis of accounting violates both the revenue recognition and matching principles.

c.         The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.

d.        As long as management is ethical, there are no problems with using the cash basis of accounting.

8. The following is selected information from J Corporation for the fiscal year ending October 31, 2007.

Cash received from customers             $300,000
Revenue earned                                      350,000
Cash paid for expenses                          170,000
Cash paid for computers on November 1, 2006 that will be used for 3 years          
      48,000
Expenses incurred, not including any depreciation       200,000
Proceeds from a bank loan, part of which was used to pay for the computers        
    100,000

Based on the accrual basis of accounting, what is J Corporation's net income for the year ending October 31, 2007?

a.         $114,000

b.        $134,000

c.         $82,000

d.        $150,000

9.  What is Sheepskin's 2006 net income using accrual accounting?

a.         $3,875

b.        $5,875

c.         $5,625

d.        $3,625

10.  Accrued revenues are

a.         received and recorded as liabilities before they are earned.

b.        earned and recorded as liabilities before they are received.

c.         earned but not yet received or recorded.

d.        earned and already received and recorded.