Question 1: A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters or years is the:
Student Answer:
Operating cycle of a business
Time period principle
Going-concern principle
Matching principle
Accrual basis of accounting
Question 2. Interim financial statements refer to financial reports:
Student Answer:
That cover less than one year, usually spanning one, three or six-month periods
That are prepared before any adjustments have been recorded
That show the assets above the liabilities and the liabilities above the equity
Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid
Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues
Question 3. Western Company has an annual reporting period that runs from July 1st through
June 30th. Based on this information which of the following is a true statement?
Student Answer:
Western probably has little seasonal variation in their sales
Western has violated the time period principle
Western must prepare financial statements as of December 31 each year
Western has adopted a fiscal year
Western does not have an accountant
Question 4. The accounting principle that requires revenue to be reported when earned is the:
Student Answer:
Matching principle
Revenue recognition principle
Time period principle
Accrual reporting principle
Going-concern principle
Question 5. Adjusting entries:
Student Answer:
Affect only income statement accounts
Affect only balance sheet accounts
Affect both income statement and balance sheet accounts
Affect only cash flow statement accounts
Affect only equity accounts
Question 6. The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:
Student Answer:
Recognition principle
Cost principle
Cash basis of accounting
Matching principle
Question 7. Which of the following accounts would not be impacted by adjusting journal entries?
Student Answer:
Accounts Receivable
Consulting Fee Earned
Unearned Consulting Fees
Cash
Wages Payable
Question 8. Prepaid expenses, depreciation, accrued expenses, unearned revenues and accrued revenues are all examples of:
Student Answer:
Items that require contra accounts
Items that require adjusting entries
Asset and equity
Asset accounts
Income statement accounts