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