1. The matching principle dictates that expenses are recorded in the accounting period in which they are paid.
A.True
B.False


2. Adjusting entries are needed every time financial statements are prepared.
A.True
B.False


3. Accrued revenues are revenues that have been received in cash and recorded as liabilities before they are earned.
A.True
B.False


4. The accrual basis of accounting is in accordance with generally accepted accounting principles.
A.True
B.False


5. Financial statements can be prepared directly from an adjusted trial balance.
A.True
B.False


6. An accounting time period that is one year in length is referred to as:
A.a calendar year.
B.a fiscal year.
C.an interim period.
D.a quarterly period.


7. The revenue recognition principle dictates that revenue be recognized in the accounting period:
A.before it is earned.
B.after it is earned.
C.in which it is earned.
D.in which it is collected.


8. Costs paid in cash and recorded as assets before they are used or consumed are called:
A.accrued expenses.
B.interim expenses.
C.prepaid expenses.
D.unearned expenses.


9. Revenues earned but not yet received in cash or recorded at the statement date are referred to as:
A.unearned revenues.
B.prepaid revenues.
C.interim revenues.
D.accrued revenues.


10. The adjusting entry for unearned revenues affects:
A.assets and expenses.
B.liabilities and revenues.
C.assets and revenues.
D.expenses and liabilities.


11. The adjusting entry for accrued expenses affects:
A.assets and expenses.
B.liabilities and revenues.
C.assets and revenues.
D.expenses and liabilities.


12. Which of the following statements related to the adjusted trial balance is incorrect?
A.It shows the balances of all accounts at the end of the accounting period.
B.It is prepared before adjusting entries have been made.
C.It proves the equality of the total debit balances and the total credit balances in the ledger.
D.Financial statements can be prepared directly from the adjusted trial balance.


13. Each adjusting entry affects:
A.balance sheet accounts only.
B.income statement accounts only.
C.expense accounts only.
D.both balance sheet and income statement accounts.


14. An adjusting entry that debits an asset and credits a revenue is necessary for:
A.prepaid expenses.
B.unearned revenues.
C.accrued revenues.
D.accrued expenses.


15. An adjusting entry that debits an expense and credits an asset is necessary for:
A.prepaid expenses.
B.unearned revenues.
C.accrued revenues.
D.accrued expenses.


16. Under the cash basis of accounting, revenue is only recorded when:
A.services are performed.
B.it is earned.
C.cash is received.
D.it is incurred.


17. An expense is recorded under the cash basis only when:
A.services are performed.
B.it is earned.
C.cash is paid.
D.it is incurred.


18. The Accumulated Amortization account is a (an):
A.asset.
B.liability.
C.expense.
D.contra asset.


19. If the adjusting entry for amortization is not made:
A.assets will be understated.
B.owner's equity will be understated.
C.net income will be understated.
D.expenses will be understated.


20. If the adjusting entry for unearned revenues is not made:
A.assets will be overstated.
B.liabilities will be overstated.
C.revenues will be overstated.
D.net income will be overstated.



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