3.1 Learning Objective 3-1
1) Under cash-basis accounting, stockholders' equity is increased when company makes a sale, not when the company collects the cash at a later date.
2) The journal entry to record a cash sale will be the same under the accrual-basis and cash-basis of accounting.
3) Under cash-basis accounting, no journal entry is recorded when a sale is made on account.
4) GAAP requires the use of accrual-basis accounting.
5) Accrual-basis accounting records the impact of both cash and noncash transactions as they occur.
6) Under cash-basis accounting, income statements and balance sheets are misstated.
7) A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual-basis accounting, the doctor recognizes revenue:
A) in March.
B) in July.
C) in either March or July.
D) at a time that cannot be determined from the facts.
8) A doctor performed surgery in April and did not receive cash payment from the patient until August. Under cash-basis accounting, the doctor recognizes revenue:
A) in April.
B) in August.
C) in April or August.
D) at a time that cannot be determined from the facts.
9) Under accrual-basis accounting, revenue is recorded:
A) when the cash is collected, regardless of when the services are performed.
B) when the services are performed, regardless of when the cash is received.
C) at the end of every month.
D) only if the cash is received at the same time the services are performed.
10) Which of the following transactions would be recorded under accrual-basis accounting but NOT under cash-basis accounting?
A) Collecting cash from customers
B) Borrowing money from the bank
C) Purchasing of inventory on account
D) Issuing stock for cash