Test Bank for Accounting, 27th Edition, Carl S. Warren, James M. Reeve Jonathan Duchac
Chapter 3 – The Adjusting Process
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True / False |
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1. Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of accounting. a. True b. False ANSWER: True DIFFICULTY: ModerateBloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAPACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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2. Generally accepted accounting principles require the accrual basis of accounting. a. True b. False ANSWER: True DIFFICULTY: ModerateBloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAPACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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3. The revenue recognition principle states that revenue should be recorded in the same period as the cash is received. a. True b. False ANSWER: False DIFFICULTY: ModerateBloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAPACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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4. The system of accounting where revenues are recorded when they are earned and expenses are recorded when they are incurred is called the cash basis of accounting. a. True b. False ANSWER: False DIFFICULTY: ModerateBloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. AccrualACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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5. The matching principle requires expenses be recorded in the same period that the related revenue is recorded. a. True b. False ANSWER: True DIFFICULTY: ModerateBloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAPACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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6. For most large businesses, the cash basis of accounting will provide accurate financial statements for user needs. a. True b. False ANSWER: False DIFFICULTY: ModerateBloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial StatementsACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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7. An example of deferred revenue is Unearned Rent. a. True b. False ANSWER: True DIFFICULTY: EasyBloom’s: Understanding LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. AccrualACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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8. Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned. a. True b. False ANSWER: True DIFFICULTY: ModerateBloom’s: Understanding LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. AccrualACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
9. If the debit portion of an adjusting entry is to an asset account, then the credit portion must be to a liability account.
a. True
b. False
ANSWER: False
DIFFICULTY: ModerateBloom’s: Understanding
LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording TransactionsACCT.ACBSP.APC.07 – Adjusting EntriesACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic
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10. The revenue recognition principle requires that the reporting of revenue be included in the period when cash for the service is received. a. True b. False ANSWER: False DIFFICULTY: ModerateBloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.18.03-01 – 03-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAPACCT.AICPA.FN.03 – MeasurementBUSPROG: Analytic |
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