True / False Questions
- Accrual-basis accounting involves recording revenues when earned and
recording expenses with their related revenues.
True False - The revenue recognition principle states that we record revenue in the
period in which we collect cash.
True False - According to the revenue recognition principle, if a company provides
services to a customer in the current year but does not collect cash until
the following year, the company should report the revenue in the current
year.
True False - Jones Corporation provides services to a customer on June 17, but the
customer does not pay for the services until August 12. According to the
revenue recognition principle, Jones Corporation should record the
revenue on August 12.
True False - The matching principle states that we recognize expenses in the same
period as the revenues they help to generate.
True False - According to the concept of expense recognition under accrual-basis
accounting, if costs associated with producing revenue in the current
year are not paid in cash until the following year, the costs should be
expensed in the current year.
True False - Under cash-basis accounting, we record revenues at the time we
receive cash and expenses at the time we pay cash.
True False - Under cash-basis accounting, the timing of cash inflows and outflows
exactly matches the reporting of revenues and expenses in the income
statement.
True False - Under cash-basis accounting, if a company provides services to a
customer in the current year but does not collect cash until the following
year, the company should report the revenue in the current year.
True False - Under cash-basis accounting, if costs associated with producing
revenue in the current year are not paid in cash until the following year,
the costs should be expensed in the following year.
True False - Because cash-basis accounting violates both the revenue
recognition principle and the matching principle, it is generally not
accepted in preparing financial statements.
True False - Adjusting entries involve recording events that have occurred but
that have not yet been recorded by the end of the period.
True False - Adjusting entries should be prepared after financial statements
are prepared.
True False - Because adjusting entries allow the proper application of the
revenue recognition principle or the matching principle, they are a
necessary part of cash-basis accounting.
True False - Prepaid expenses involve payment of cash (or an obligation to
pay cash) for the purchase of an asset before the expense is incurred.
True False - Deferred revenues occur when cash is received after the revenue
is earned.
True False - Accrued expenses involve the payment of cash before recording
an expense and a liability.
True False - Accrued revenues involve the receipt of cash after the revenue
has been earned and an asset has been recorded.
True False - The adjusting entry for a prepaid expense always includes a debit
to an expense account and a credit to a liability account.
True False - The adjusting entry for a prepaid expense has the effect of
reducing total assets and reducing net income.
True False - The Supplies account is an example of an accrued expense.
True False - Suppose Simeon Company begins the year with $1,000 in
supplies, purchases an additional $5,500 of supplies during the year,
and ends the year with $700 in supplies. The year-end adjusting entry
includes Supplies Expense of $7,200.
True False - The adjusting entry for a deferred revenue always includes a debit
to an asset account and a credit to a revenue account.
True False - The adjusting entry for a deferred revenue has the effects of
reducing liabilities and increasing net income.
True False - On November 1, 2018, a company receives $1,800 for services to
be provided evenly over the next six months. The December 31, 2018,
adjusting entry for the company would include a credit to Deferred
Revenue for $600.
True False - The adjusting entry for an accrued expense always includes a
debit to an expense account and a credit to a liability account.
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