Podcast
Questions and Answers
Which accounting principle states that efforts (expenses) should be matched with results (revenues)?
Which accounting principle states that efforts (expenses) should be matched with results (revenues)?
- Revenue recognition principle
- Time period assumption
- Accrual-basis accounting
- Expense recognition principle (correct)
What does the time period assumption state in accounting?
What does the time period assumption state in accounting?
- Companies record transactions in the period in which the events occur
- Companies record transactions when cash is paid or received
- Accountants divide the economic life of a business into artificial time periods (correct)
- Efforts (expenses) should be matched with results (revenues)
What is the purpose of accrual-basis accounting?
What is the purpose of accrual-basis accounting?
- Record transactions when cash is paid or received
- Divide a business's economic life into artificial time periods
- Match expenses with revenues (correct)
- Start the accounting year on January 1
What is the concept behind the expense recognition principle?
What is the concept behind the expense recognition principle?
In accrual-basis accounting, when are expenses typically recognized?
In accrual-basis accounting, when are expenses typically recognized?
What does the revenue recognition principle focus on?
What does the revenue recognition principle focus on?
What is the main purpose of the time period assumption in accounting?
What is the main purpose of the time period assumption in accounting?
In accrual-basis accounting, when are transactions recorded?
In accrual-basis accounting, when are transactions recorded?
According to accrual-basis accounting, when should revenue be recognized?
According to accrual-basis accounting, when should revenue be recognized?
What is the purpose of matching expenses with revenues in accounting?
What is the purpose of matching expenses with revenues in accounting?
Why do most large companies prepare both quarterly and annual financial statements?
Why do most large companies prepare both quarterly and annual financial statements?
What is the fiscal year in accounting?
What is the fiscal year in accounting?
Which of the following statements about the accrual basis of accounting is true?
Which of the following statements about the accrual basis of accounting is true?
Why are adjusting entries necessary in accounting?
Why are adjusting entries necessary in accounting?
What principle guides revenue recognition in accounting?
What principle guides revenue recognition in accounting?
When should expenses be recognized according to accounting standards?
When should expenses be recognized according to accounting standards?
Which of the following is NOT consistent with generally accepted accounting principles (GAAP)?
Which of the following is NOT consistent with generally accepted accounting principles (GAAP)?
What is the primary purpose of ensuring that balance sheet and income statement accounts have correct balances through adjusting entries?
What is the primary purpose of ensuring that balance sheet and income statement accounts have correct balances through adjusting entries?
Study Notes
- Accountants use the accrual basis of accounting to record transactions when they occur, not necessarily when cash is exchanged.
- Adjusting entries are necessary to ensure that revenue recognition and expense recognition principles are followed accurately.
- The time period assumption divides the economic life of a business into artificial time periods like months, quarters, or years.
- Adjusting entries can be categorized into deferrals (prepaid expenses, unearned revenues) and accruals (accrued revenues, accrued expenses).
- Adjusting entries are essential to update the trial balance with accurate and complete data before preparing financial statements.
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Description
Test your knowledge on the accrual basis of accounting, preparing adjusting entries for deferrals and accruals, and understanding the nature of an adjusted trial balance. Explore the reasons for adjusting entries and the Time Period Assumption in accounting.
