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Accounting CH 3/4 study cards

Accountants divide the economic life of a business into artificial time periods because of the time period assumption.
TRUE
Generally, an accounting period less than one year is referred to as an interim period.

Which of the following time periods would not be referred to as an interim period?

ANNUALY
The time period assumption states that
the economic life of a business can be divided into artificial time periods.
The revenue recognition principle dictates that companies recognize revenue in the accounting period in which service is performed.

The revenue recognition principle dictates that companies recognize revenue in the accounting period before the service is performed.

FALSE
The revenue recognition principle dictates that revenue is recognized when services are performed.

The revenue recognition principle dictates that revenue should be recognized in the accounting records

when services are performed.
The expense recognition principle states expenses incurred to generate revenue should be recorded in the period the revenue is generated.

The expense recognition principle matches

Revenue with expense
A company must make adjusting entries every time it prepares financial statements
TRUE
An adjusting entry always affects
an income statement account and a balance sheet account.
If a resource has been consumed but a bill has not been received at the end of the accounting period,
an adjusting entry should be made recognizing the expense.
Prior to adjustment for prepaid expenses, assets are understated and expenses are overstated.
false
Accumulated Depreciation is an asset account.
FALSE, it is an contra asset account
An adjusting entry for accrued expenses increases an expense and also increases a liability account.
TRUE
TRUE OR FALSE, Prior to adjustment for unearned revenues, liabilities are understated and revenues are overstated.
FALSE
Cathy Cline, an employee of Merlin Company, will not receive her paycheck until April 2. Based on services performed from March 16 to March 31, her salary was $900. The adjusting entry for Merlin Company on March 31 includes
a debit to Salaries and Wages Expense for $900.
Companies can prepare financial statements directly from an adjusted trial balance.
true
Cathy Cline, an employee of Merlin Company, will not receive her paycheck until April 2. Based on services performed from March 16 to March 31, her salary was $900. The adjusting entry for Merlin Company on March 31 includes
a debit to Salaries and Wages Expense for $900.
The adjusted trial balance is prepared
after the adjusting entries are prepared and posted to the ledger.
Which of the following errors will not cause a trial balance to be out of balance?
A credit to Accounts Receivable was posted as a credit to Cash.
The use of alternative adjusting entries does not apply to accrued revenues and accrued expenses.
true
If a company initially records the purchase of supplies to the Supplies Expense account, the amount of the adjusting entry made at the end of an accounting period will be equal to
the supplies on hand at the end of the period.
If cash received for future services is initially recorded in revenue accounts and the company has not yet performed all of the required services at the end of the accounting period, then failure to make an adjusting entry will cause
revenues to be overstated.
Going concern is the qualitative characteristic of accounting information that allows a statement reader to compare a company’s performance from one year to the next.
false
A worksheet is a device that eliminates the need to prepare financial statements.
false
Companies journalize the adjustments after they complete the worksheet but before preparing the financial statements.
false
A worksheet is not a journal, and it cannot be used as a basis for posting to the ledger accounts.
true
In closing the books, all temporary accounts are closed.
true
The Owner’s Drawings account is closed through the Income Summary account.
false
Closing entries are necessary for
temporary accounts
The post-closing trial balance will contain only permanent accounts.
true
The purpose of the post-closing trial balance is to
prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
A post-closing trial balance will contain only
permanent accounts.
Which one of the following is an optional step in the accounting cycle of a business enterprise?
prepare a work sheet
Which of the following steps in the accounting cycle may be performed more frequently than annually?
prepare a trial balance
All of the following are required steps in the accounting cycle except
preparing a worksheet.
Correcting entries are only made at the end of an accounting period.
false
Correcting entries
may involve any combination of accounts in need of correction.
On September 23, Reese Company received a $350 check from Mike Moluf for services to be performed in the future. The bookkeeper for Reese Company incorrectly debited Cash for $350 and credited Accounts Receivable for $350. The amounts have been posted to the ledger. To correct this entry, the bookkeeper should
debit Accounts Receivable $350 and credit Unearned Service Revenue $350.
On the balance sheet, companies usually list current assets in the order of largest to smallest.
False
Current liabilities are obligations that are reasonably expected to be paid from existing current assets or through the creation of other current liabilities.
true
All of the following are property, plant, and equipment except
supplies
Current liabilities
are obligations that the company expects to pay within the coming year or the operating cycle, whichever is longer.
Use of reversing entries is not a required step in the accounting cycle.
true
A reversing entry
is the exact opposite of an adjusting entry made in a previous period.
Use of reversing entries
simplifies the recording of subsequent transactions.

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