Chapter 3—The Adjusting Process

MULTIPLE CHOICE

1. The revenue recognition concept

a is in not in conflict with the cash method of accounting
.
b determines when revenue is credited to a revenue account
.
c states that revenue is not recorded until the cash is received
.
d controls all revenue reporting for the cash basis of accounting
.
ANS: B PTS: 1 DIF: Moderate OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-02-GAAP

2. The matching concept

a addresses the relationship between the journal and the balance sheet
.
b determines whether the normal balance of an account is a debit or credit
.
c requires that the dollar amount of debits equal the dollar amount of credits on a trial
. balance
d determines that expenses related to revenue be reported at the same time the revenue is
. reported
ANS: D PTS: 1 DIF: Moderate OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-02-GAAP

3. Using accrual accounting, revenue is recorded and reported only

a when cash is received without regard to when the services are rendered
.
b when the services are rendered without regard to when cash is received
.
c when cash is received at the time services are rendered
.
d if cash is received after the services are rendered
.
ANS: B PTS: 1 DIF: Moderate OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-04-Cash vs. Accrual

4. Using accrual accounting, expenses are recorded and reported only

a when they are incurred, whether or not cash is paid
.
b when they are incurred and paid at the same time
.
c if they are paid before they are incurred
.
d if they are paid after they are incurred
 .
ANS: A PTS: 1 DIF: Moderate OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-04-Cash vs. Accrual

5. One of the accounting concepts upon which deferrals and accruals are based is
a matching
.
b cost
.
c price-level adjustment
.
d conservatism
.
ANS: A PTS: 1 DIF: Moderate OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-02-GAAP