In general, accountants measure income using an approach based on:

transactions   Correct or    economicsIncorrect

 

Which concept holds that an organization's life can be divided into discrete accounting periods (months, quarters, years)?

transactions approach   Incorrect or    periodicity assumptionCorrect

 

The periodicity assumption seems practical and logical; however, it introduces allocation problems when dividing the life of a company into specific units of time.

true    Correct or    falseIncorrect

 

Under the accrual basis of accounting, revenue should be recognized at the time services are rendered or when goods are sold and delivered to a customer.

right    Correct or    wrongIncorrect

 

Business expenses should be recognized in the same period as the revenues they helped to produce. This concept is known as the:

matching principle    Correct or    cash basis of accountingIncorrect

 

Adjusting entries are necessary to fulfill the goals of proper income measurement and are consistent with the cash basis of accounting.

true   Incorrect or    falseCorrect

 

The recording and accounting for prepaid expenses, depreciation, and similar items is consistent with the adjusting process for:

multiperiod costs and revenues that must be split among two or more accounting periods   Correct

or

   revenues and expenses that have been earned or incurred in a given period but not recorded in the accountsIncorrect

 

Revenues and expenses that gradually accumulate throughout an accounting period are known as:

accruals   Correct or    deferralsIncorrect

 

An appropriate journal entry to record accrued interest would involve a debit to Interest Expense and a credit to:

Interest Payable   Correct or    Unearned InterestIncorrect

 

Adjusting entries should be determined:

subsequent to preparing financial statements   Incorrect or    prior to preparing financial statementsCorrect

 

An adjusted trial balance is prepared by changing specific account balances in the trial balance by the amount of the adjustments from the adjusting entries.

true    Correct or    falseIncorrect

 

Prepaid expenses would initially be recorded in an expense account under which adjusting entry approach?

balance sheet approach   Incorrect or   income statement approachCorrect

 

If the income statement approach is used to record revenues received in advance of being earned, then an adjusting entry will always be necessary at the end of the accounting period.

true    Incorrect or   falseCorrect

 

Under the cash basis of accounting, revenues and expenses are recognized as receipts and payments occur.

true    Correct or    falseIncorrect

 

Which method of accounting is theoretically preferred and used by virtually all large companies?

accrual basis    Correct or    cash basisIncorrectIncorrect