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