10 Questions
What system of accounting records revenues and expenses only when cash is received or paid?
Cash basis
Which principle ensures that expenses are reported in the same period as the revenues they helped generate?
Matching principle
Under which accounting system is revenue recognized when it is earned, regardless of when cash is received?
Accrual basis
What is the main purpose of the Time period principle in accounting?
To divide the earning of income over a period of time
When does an expense occur according to the Expense Recognition & Matching Principle?
When an asset has no future benefit
Which of the following is true about assets and expenses?
Assets are unexpired costs, while expenses are expired costs.
What is the primary purpose of adjusting entries?
To update account balances before financial statements are prepared.
Which of the following is an example of a deferred expense?
Prepaid rent
What is the purpose of depreciation?
To allocate the cost of a long-lived asset over its useful life.
If a company purchases a delivery truck on January 1 for $21,000 with an estimated useful life of 5 years and a salvage value of $3,000, what would be the annual depreciation expense using the straight-line method?
$3,600
Test your knowledge on the cash basis and accrual basis of accounting. Learn about how transactions are recorded and when revenues and expenses are recognized under each system.
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