1. Which of the following statements about the accounting cycle is true?
A. The accounting cycle is the process of recording all economic events that affect the entity.
B. The accounting cycle is the process of entering data into the accounting system to be processed, organized and used to produce financial statements.
C. The accounting cycle is only applicable for entities using accrual accounting.
D. The accounting cycle is completed on a weekly basis.
2. Which of the following economic events would be captured by an accrual accounting system, but not by a cash accounting system?
A. Sale of a good for cash.
B. Purchase of supplies for cash.
C. Purchase of a piece of equipment with a note payable.
D. Purchase of shares for cash by a shareholder.
3. Which of the following economic events would be captured by an accrual accounting system, but not by a cash accounting system?
A. Receipt of payment for a previous sale made on credit.
B. Payment of an amount owing on a previous purchase.
C. Payment of dividends to shareholders.
D. Use of a previously purchased piece of equipment in production.
4. Which of the following best describes the matching concept in accounting?
A. Revenues should be recorded in the same period as the expenses related to it are paid.
B. Revenue should be recorded in the same period as the cash is received.
C. Expenses should be recorded when paid.
D. Expenses should be recorded in the same period as the revenue they helped earn is recorded.
5. Able Inc has a December 31st
year-end. They provided services worth $4,000 in December and were paid $1,000 in cash at that time with the rest due in January. The employees who performed the services were paid $2,500 for their work in January. Under the matching concept how much net income/loss would be reported in December?
A. ($1,500)
B. $1,000
C. $1,500
D. $4,000
6. The recording of expenses in the same period as that in which the revenue is recorded is the application of which accounting concept?
A. Matching
B. Revenue recognition
C. Accrued expenses
D. Conservatism
7. Which of the following illustrates the matching principle?
A. Expensing the cost of an item sold at the same as the revenue is recognized.
B. Expensing a fixed asset when purchased.
C. Expensing a fixed asset at the end of its useful life.
D. Waiting until the cash is collected before recognizing revenue.
8. Which of the following is an advantage of accrual accounting?
A. It does not require any judgment.
B. It provides more relevant information.
C. It does not provide more reliable information.
D. It records all economic events.
9. Under accrual accounting, which of the following statements about revenue recognition is true?
A. Revenue recognition is always straightforward.
B. Revenue can only be recognized when the goods are delivered.
C. Revenue can only be recognized when the expenses are paid.
D. Revenue recognition should occur when the entity enjoys the economic benefit.
10. What is used to enter the information about economic events into the accounting system?
A. A journal entry
B. An adjusting entry
C. A closing entry
D. A temporary account