Accounting Chapter 4 Flashcards
Accrual-basis accounting
Accounting basis in which companies record, in the periods in which the events occur, transactions that change a company’s financial statements, even if cash was not exchanged.
Accrued expenses
Expenses incurred but not yet paid in cash or recorded.
Accrued revenues
Revenues for services preformed but not yet received in cash or recorded
Adjusted trial balance
A list of accounts and their balances after all adjustments have been made
Adjusting entries
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
Book Value
The difference between the cost of a depreciable asset and its related accumulated depreciation.
Cash-basis accounting
Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.
Closing entires
Entires at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders’ equity account, Retained Earnings
Contra Asset Account
An account that is offset against account on the balance sheet.
Depreciation
The process of allocating the cost of an asset to expense over its useful life.
Earnings management
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.
Expense recognition principle
The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues
Fiscal year
An accounting period that is one year long
Income summary
A temporary account used in closing revenue and expense accounts
Periodicity assumption
An assumption that the economic life of a business can be divided into artificial time periods.
Permanent accounts
Balance sheet accounts whose balances are carried forward to the next accounting period.
Post-closing trial balance
A list of permanent accounts and their balances after a company has journalized and posted closing entries.
Prepaid expenses
Expenses paid in cash before they are used or consumed.
Quality of earnings
Indicates the level of full and transparent information that a company provides to users of its financial statements.
Revenue recognition principle
The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.
Reversing entry
An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.
Temporary accounts
Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.
Unearned revenues
Cash received and a liability recorded before services are performed.
Useful life
The length of service of a productive asset
Worksheet
A multiple-column form that companies may use in the adjustment process and in preparing financial statements.
Accounting basis in which companies record, in the periods in which the events occur, transactions that change a company’s financial statements, even if cash was not exchanged.
Accrual-basis accounting
Accrued expenses
Permanent accounts
Reversing entry
Accrual-basis accounting
Expenses incurred but not yet paid in cash or recorded.
Accrued expenses
Adjusted trial balance
Book value
Prepaid expenses
Accrued expenses
Revenues for services performed but not yet received in cash or recorded.
Accrued revenues
Depreciation
Periodicity assumption
Useful life
Accrued revenues
A list of accounts and their balances after all adjustments have been made.
Accrual-basis accounting
Accrued expenses
Accrued revenues
Adjusted trial balance
Adjusted trial balance
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
Adjusted trial balance
Adjusting entries
Contra asset account
Post-closing trial balance
Adjusting entries
The difference between the cost of a depreciable asset and its related accumulated depreciation.
Accrued revenues
Adjusted trial balance
Book value
Earnings management
Book value
Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.
Adjusted trial balance
Cash-basis accounting
Closing entries
Depreciation
Cash-basis accounting
Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders’ equity account, Retained Earnings.
Cash-basis accounting
Closing entries
Periodicity assumption
Worksheet
Closing entries
An account that is offset against an asset account on the balance sheet.
Accrued expenses
Cash-basis accounting
Contra asset account
Permanent accounts
Contra asset account
The process of allocating the cost of an asset to expense over its useful life.
Adjusted trial balance
Adjusting entries
Depreciation
Revenue recognition principle
Depreciation
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.
Cash-basis accounting
Earnings management
Periodicity assumption
Useful life
Earnings management
The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.
Cash-basis accounting
Expense recognition principle
Revenue recognition principle
Temporary accounts
Expense recognition principle
An accounting period that is one year long.
Fiscal year
Income Summary
Quality of earnings
Revenue recognition principle
Fiscal year
A temporary account used in closing revenue and expense accounts.
Accrued expenses
Accrued revenues
Adjusting entries
Income Summary
Income Summary
An assumption that the economic life of a business can be divided into artificial time periods.
Periodicity assumption
Permanent accounts
Quality of earnings
Reversing entry
Periodicity assumption
Balance sheet accounts whose balances are carried forward to the next accounting period.
Adjusting entries
Fiscal year
Income Summary
Permanent accounts
Permanent accounts
A list of permanent accounts and their balances after a company has journalized and posted closing entries.
Expense recognition principle
Fiscal year
Post-closing trial balance
Useful life
Post-closing trial balance
Expenses paid in cash before they are used or consumed.
Adjusted trial balance
Book value
Prepaid expenses
Temporary accounts
Prepaid expenses
Indicates the level of full and transparent information that a company provides to users of its financial statements.
Accrued revenues
Prepaid expenses
Quality of earnings
Temporary accounts
Quality of earnings
The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.
Accrued revenues
Periodicity assumption
Revenue recognition principle
Useful life
Revenue recognition principle
An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.
Closing entries
Earnings management
Reversing entry
Worksheet
Reversing entry
Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.
Adjusting entries
Depreciation
Permanent accounts
Temporary accounts
Temporary accounts
Cash received and a liability recorded before services are performed.
Accrued revenues
Post-closing trial balance
Unearned revenues
Worksheet
Unearned revenues
The length of service of a productive asset.
Accrued expenses
Adjusting entries
Temporary accounts
Useful life
Useful life
A multiple-column form that companies may use in the adjustment process and in preparing financial statements.
Depreciation
Income Summary
Quality of earnings
Worksheet
Worksheet
A revenue account is closed with a credit to the revenue account and a debit to Income Summary.
True False
False
The final step in the accounting cycle is to prepare:
adjusting entries.
closing entries.
financial statements.
a post-closing trial balance.
a post-closing trial balance.
The cash basis of accounting is not in accordance with generally accepted accounting principles.
True False
True
The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.
False True
False
The accounting cycle begins with the journalizing of the transactions.
False True
False
The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that:
dividends should be matched with stockholder investments.
efforts should be matched with accomplishments.
cash payments should be matched with cash receipts.
assets should be matched with liabilities.
efforts should be matched with accomplishments.
A small company may be able to justify using a cash basis of accounting if they have:
all sales and purchases on account.
no accountants on staff.
few receivables and payables.
sales under $1,000,000.
few receivables and payables.
Expense recognition is tied to revenue recognition.
True False
True
The difference between the balance of a plant asset account and the related accumulated depreciation account is termed:
book value.
contra asset.
liability.
market value.
book value.
Based on the account balances below, what is the total of the debit and credit columns of the adjusted trial balance?
Service revenue $4,300 Equipment $7,400 Cash 1,525 Prepaid insurance 1,225 Unearned service revenue 5,320 Depreciation expense 640 Salaries and wages expense 1,050 Accum. depreciation 1,280 Common stock 390 Retained earnings 550
$11,840
$10,150
$11,430
$10,560
$11,840
The accrued interest for a three month note payable of $10,000 dated December 1, 2013 at an interest rate of 6% is $150 on December 31, 2013.
False True
False
Accrued expenses are:
paid and recorded in an asset account after they are used or consumed.
paid and recorded in an asset account before they are used or consumed.
incurred but not yet paid or recorded.
incurred and already paid or recorded.
incurred but not yet paid or recorded.
The closing entry process consists of closing:
all permanent accounts.
out the Retained Earnings account.
all temporary accounts.
all asset and liability accounts.
all temporary accounts.
A company purchased office supplies costing $3,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:
debit Supplies Expense, $3,900; credit Supplies, $3,900.
debit Supplies, $2,100; credit Supplies Expense, $2,100.
debit Supplies Expense, $2,100; credit Supplies, $2,100.
debit Supplies, $900; credit Supplies Expense, $900.
debit Supplies Expense, $2,100; credit Supplies, $2,100.
An adjusted trial balance must be prepared before the adjusting entries can be recorded.
False True
False
The revenue recognition principle dictates that revenue is recognized in the period in which the cash is received.
True
False
False
The expense recognition principle requires that expenses be recognized in the same period that they are paid.
True
False
False
What is the periodicity assumption?
The economic life of a business can be divided into artificial time periods.
Companies should recognize revenue in the accounting period in which the performance obligation is satisfied.
The fiscal year should correspond with the calendar year.
Companies should match expenses with revenues.
The economic life of a business can be divided into artificial time periods.
Which principle dictates that efforts (expenses) be matched with results (revenues)?
Periodicity principle.
Historical cost principle.
Revenue recognition principle.
Expense recognition principle.
Expense recognition principle.
The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the
accrued revenues principle.
expense recognition principle.
periodicity assumption.
revenue recognition principle.
revenue recognition principle.
The cash basis of accounting is in accordance with generally accepted accounting principles.
False
True
False
If revenues are recognized only when a customer pays, what method of accounting is being used?
Cash-basis
Matching basis
Accrual-basis
Recognition basis
Cash-basis
Under the cash-basis of accounting, revenues are recognized when cash is received, not when.performance obligation is satisfied.
Which one of these statements about the accrual-basis of accounting is false?
This basis is in accord with generally accepted accounting principles.
Companies record events that change a company’s financial statements in the periods in which the events occur.
Companies recognize revenue in the period in which the performance obligation is satisfied.
Companies record revenue only when they receive cash, and record expense only when they pay out cash.
Companies record revenue only when they receive cash, and record expense only when they pay out cash.
In 2013, Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2014. If Costello uses the accrual-basis of accounting, then Costello will report
net income of $7,000 in 2014.
expenses of $3,000 in 2014.
revenue of $10,000 in 2014.
revenue of $10,000 in 2013.
revenue of $10,000 in 2013.
The accrual-basis of accounting records revenues when the performance obligation is satisfied and expenses when incurred. Cash movement is not necessary.
Which statement is correct?
As long as management is ethical, there are no problems with using the cash basis of accounting.
As long as a company consistently uses the cash-basis of accounting, generally accepted accounting principles allow its use.
The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.
The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.
The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.
Accrued expenses are expenses that have already been paid.
False
True
False
Accrued expenses are expenses that have been incurred in the period but which have not yet been entered into the financial records. Accruals are done to follow the revenue recognition and expense recognition principles.
Which of the following is not a type of adjusting entry?
Prepaid expenses
Accrued revenues
Accrued expenses
Earned revenues
Earned revenues
Adjusting entries are made to ensure that:
expenses are recognized in the period in which they are incurred.
revenues are recorded in the period in which the performance obligation is satisfied.
balance sheet and income statement accounts have correct balances at the end of an accounting period.
All of these answer choices are correct.
All of these answer choices are correct.
Each of the following is a major type (or category) of adjusting entry except
prepaid expenses.
accrued revenues.
accrued expenses.
earned expenses.
earned expenses.
Which one of the following is not a justification for adjusting entries?
Adjusting entries are necessary to bring the general ledger accounts in line with the budget.
Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.
Adjusting entries are necessary to ensure that the revenue recognition principle is followed.
Adjusting entries are necessary to ensure that the expense recognition principle is followed.
Adjusting entries are necessary to bring the general ledger accounts in line with the budget.
Book value is equal to cost minus accumulated depreciation.
False
True
True
Cash received before services are performed which is recorded as a debit to a Cash account and a credit to a liability account is called
an accrued revenue.
an unearned revenue.
an unrecorded revenue.
None of these answer choices are correct.
an unearned revenue.
Which of the following is not a typical example of a prepaid expense?
Wages
Supplies
Insurance
Rent
Wages
The difference between an asset’s cost and its accumulated depreciation is called
real value.
market value.
fair value.
book value.
book value.
Cash received before services are performed are recorded as
equity.
expenses.
liabilities.
revenues.
liabilities
Adjustments for unearned revenues:
increase liabilities and increase revenues.
increase assets and increase revenues.
decrease revenues and decrease assets.
decrease liabilities and increase revenues.
decrease liabilities and increase revenues.
Adjustments for prepaid expenses
decrease assets and increase expenses.
decrease assets and increase revenues.
decrease revenues and increase assets.
decrease expenses and increase assets.
decrease assets and increase expenses.
Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be
Supplies Expense $1,300
Supplies $1,300
Supplies $3,700
Supplies Expense $3,700
Supplies Expense $3,700
Supplies $3,700
Supplies $1,300
Supplies Expense $4,000
Supplies Expense $3,700
Supplies $3,700
This entry correctly adjusts supplies to a balance of $1,300 and records the expense for the period of $3,700.
On September 1 the Petite-Sizes Store paid $12,000 to the Mega-Mall Co. for 3 months rent beginning September 1. Prepaid Rent was debited for the payment. If Petite-Sizes Store prepares financial statements on September 30, the appropriate adjusting journal entry to make on September 30 would be
Prepaid Rent $4,000
Rent Expense $4,000
Prepaid Rent $8,000
Rent Expense $8,000
Rent Expense $8,000
Prepaid Rent $8,000
Rent Expense $4,000
Prepaid Rent $4,000
Rent Expense $4,000
Prepaid Rent $4,000
On July 1, Mesa Verde, Inc. purchased a 3-year insurance policy for $12,600. Prepaid Insurance was debited for the entire amount. On December 31, when the annual financial statements are prepared, the appropriate adjusting journal entry would be
Insurance Expense $2,100
Prepaid Insurance $2,100
Prepaid Insurance $2,100
Insurance Expense $2,100
Insurance Expense $10,500
Prepaid Insurance $10,500
Prepaid Insurance $10,500
Insurance Expense $10,500
Insurance Expense $2,100
Prepaid Insurance $2,100
This entry correctly adjusts the accounts to recognize that six months of the 36 month policy have expired and are recorded as expense.
At December 31, 2013, before any year-end adjustments, Macarty Company’s Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be
$1,900
$1,500
$1,200
$2,700
$1,500
On August 1 the Darius Co. purchased a photocopy machine for $8,000. The estimated annual depreciation on the machine is $1,680. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be
Depreciation Expense $1,680
Accumulated Depreciation $1,680
Depreciation Expense $140
Accumulated Depreciation $140
Depreciation Expense $700
Accumulated Depreciation $700
Depreciation Expense $700
Equipment $700
Depreciation Expense $700
Accumulated Depreciation $700
1680/12=140
140*5=700
Bonita Realty Management Co. received a check for $30,000 on October 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rental Revenue was credited for the full $30,000. Financial statements are prepared on December 31. The appropriate adjusting journal entry to make on December 31 would be
Unearned Rent Revenue $22,500
Rent Revenue $22,500
Unearned Rent Revenue $7,500
Rent Revenue $7,500
Rent Revenue $22,500
Unearned Rent Revenue $22,500
Rent Revenue $2,500
Unearned Rent Revenue $2,500
Unearned Rent Revenue $7,500
Rent Revenue $7,500
This entry correctly reduces the liability and recognizes the revenue earned in the period.
30,000/12=2,500
2,500*3=7,500
If the adjusting entry is not made for unearned revenues the result will be to
understate retained earnings and overstate revenues.
overstate liabilities and understate revenues.
overstate assets and understate liabilities.
understate net income and overstate retained earnings.
overstate liabilities and understate revenues.
The missing entry would reduce a liability through a debit entry and increase revenues through a credit entry.
Prior to an accrual adjustment, the revenue account (and the related asset account) or the expense account (and the related liability account) is understated.
True
False
True
Which of the following is not a typical example of an accrued expense?
Interest
Taxes
Depreciation
Wages
Depreciation
During the adjusting process two transactions were missed. The first is for unearned rent revenue of which $450 was earned during the period, the second was for accrued interest payable of which $275 is owed for the period. As a result of these omissions
liabilities are overstated by $725.
revenue is overstated by $725.
assets are overstated by $725.
net income is understated by $175.
net income is understated by $175.
Adjustments for accrued revenues:
decrease assets and decrease revenues.
decrease liabilities and increase revenues.
increase assets and increase liabilities.
increase assets and increase revenues.
increase assets and increase revenues.
At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?
Assets at the end of the year are understated.
Stockholders’ equity at the end of the year is understated.
Salaries and Wages Expense for the year is overstated.
Liabilities at the end of the year are understated.
Liabilities at the end of the year are understated.
On August 1, Luang Corporation signed a $30,000, 14%, 2-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be
Interest Expense $1,750
Interest Payable $1,750
Interest Expense $4,200
Notes Payable $4,200
Interest Expense $1,750
Notes Payable $1,750
Interest Expense $4,200
Interest Payable $4,200
Interest Expense $1,750
Interest Payable $1,750
30,000*.14=4,200
4,200/12=350*5=1,750
Saira works for a sports franchise which pays wages and salaries earned on a monthly basis. A new accountant was hired by the sports franchise in late May. Due to inexperience, the new accountant failed to accrue Saira’s salary for May. What is the impact on the May 31 financial statements of the sports franchise?
Revenues are overstated; income is understated.
Expenses are understated; income is overstated.
Liabilities are overstated; retained earnings is overstated.
Liabilities are understated; assets are overstated.
Expenses are understated; income is overstated.
Employees at the Waco Waffle House were paid on Friday, December 27 for the five days ending on December 27. The next payday is Friday, January 3. Employees work 5 days a week. The weekly payroll amounts to $3,800. The appropriate adjusting journal entry on December 31 would be to credit Salaries and Wages Payable for
$3,800
$2,280
$760
$1,520
$1,520
A company lends $15,000 at 8% interest for 3 months on June 1. If adjusting entries are recorded on June 30, how much will be credited to Interest Revenue?
$300
$1,200
$900
$100
$100
The formula is Principal x Rate x Time or $15,000 x 8% x (1/12) since interest is stated in an annual rate yielding a value of $100.
An Adjusted Trial Balance is prepared after the books of a company are closed at the end of the accounting period.
False
True
False
The Adjusted Trial Balance is used to prepare the company’s financial statements. The final step in the accounting cycle is the closing process.
Which statement is incorrect concerning the adjusted trial balance?
The adjusted trial balance provides the primary basis for the preparation of financial statements.
An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made.
The adjusted trial balance lists the account balances segregated by assets and liabilities.
The company prepares the adjusted trial balance after it has journalized and posted the adjusting entries.
The adjusted trial balance lists the account balances segregated by assets and liabilities.
Financial statements can be prepared directly from the
adjusted trial balance.
post-closing trial balance.
reversing trial balance.
trial balance.
adjusted trial balance.
At the end of the accounting period, all balance sheet accounts are closed out.
False
True
False
Balance sheet account are permanent accounts which carry a balance from one period to the next. Only temporary accounts (revenues, expenses, dividends) are closed out at the end of the accounting period.
The following journal entries have been made during the closing process:
Sales Revenues 8,750
Service Revenues 2,375
Income Summary 11,125
Income Summary 5,775
Sales Expenses 3,550
Service Expenses 975
Administrative Expenses 1,250
Retained Earnings 1,125
Dividends 1,125
What was the net change in Retained Earnings?
Retained Earnings increased by $5,350 during this period.
Retained Earnings decreased by $4,225 during this period.
Retained Earnings increased by $4,225 during this period.
Retained Earnings decreased by $5,350 during this period.
Retained Earnings increased by $4,225 during this period.
Retained Earnings increases through revenues, $11,125, and decreases through expenses and dividends, $5,775 and $1,125, so the increase in Retained Earnings is $4,225.
With the adjusted trial balance in hand you see that the debit totals of the real accounts is $18,250 and the credit totals of the real accounts is $14,550. The debit total of the nominal or temporary accounts is $3,475 while the credit total of the nominal or temporary accounts is $7,175. From this you know that:
retained earnings will increase by $3,700 through the closing process.
net income is $3,700 for the fiscal period.
there is an error in the adjusted trial balance.
net loss is $3,700 for the fiscal period.
retained earnings will increase by $3,700 through the closing process.
The difference of nominal or temporary account debits and credits of a debit of $3,700 indicates growth in the company for the fiscal period – an increase in retained earnings, not net income or loss since you do not know revenue and expense or dividend issues.
In the closing process total revenues are determined to be $4,750 while total expenses are determined to be $3,875 and total dividends are $1,150. The retained earnings account will:
decrease by $275 due to net income.
decrease by $875 due to net income.
increase by $875 due to net income.
increase by $275 due to net income.
increase by $875 due to net income.
Retained earnings will increase by revenues of $4,750 less expenses of $3,875, or $875. Dividends do not affect net income.
Which account will have a zero balance after a company has journalized and posted closing entries?
Service Revenue.
Accumulated Depreciation.
Prepaid Insurance.
Advertising Supplies.
Service Revenue.
Which types of accounts will appear in the post-closing trial balance?
Temporary accounts.
Accounts shown in the income statement columns of a work sheet.
None of these answer choices are corrrect.
Permanent accounts.
Permanent accounts.
Which of the following correctly describes the closing process?
Each revenue and each expense account is closed individually to Retained Earnings.
Net income or net loss is transferred to the Cash account.
Net income or net loss is transferred to Retained Earnings.
Permanent accounts become ready to accumulate data in the next accounting period.
Net income or net loss is transferred to Retained Earnings.
The closing process closes the accounts in groupings such as revenues, then expenses. The accounts are not closed individually. Net income or losses are transferred to the Retained Earnings account through the closing process.
The closing entry process consists of closing
all temporary accounts.
out the Retained Earnings account.
all asset and liability accounts.
all permanent accounts.
all temporary accounts.
The closing process closes all temporary or nominal accounts such as revenues, expenses, and dividends. Real or permanent accounts such as assets, liabilities, stock, and retained earnings accounts are not closed.
The accounting cycle requires that closing entries be prepared on a monthly basis.
True
False
False
This statement is incorrect. Closing entries usually take place only at the end of a company’s annual accounting period.
All of the following are required steps in the accounting cycle except:
journalizing and posting closing entries.
preparing a worksheet.
preparing an adjusted trial balance.
preparing a post-closing trial balance.
preparing a worksheet.
The final step in the accounting cycle is to prepare
financial statements.
a post-closing trial balance.
closing entries.
adjusting entries.
a post-closing trial balance.
Which is the correct order of steps in the accounting cycle?
Post transactions, journalize transactions, prepare a trial balance, prepare financial statements.
Journalize and post transactions, journalize and post closing entries, journalize and post adjusting entries.
Prepare financial statements, prepare adjusting entries, prepare closing entries, prepare a post-closing trial balance.
Journalize and post transactions, journalize and post adjusting entries, journalize and post closing entries.
Journalize and post transactions, journalize and post adjusting entries, journalize and post closing entries.
In computing net cash provided by operating activities, certain non-cash items such as depreciation must be eliminated from net income.
True
False
True
This statement is correct. The income statement is prepared on an accrual-basis and therefore contains items of revenue and expense which do not represent cash inflows or outflows.
Which of the following is not based on accrual accounting?
Net income
Total assets
Net cash provided by operating activities
Retained earnings
Net cash provided by operating activities
Which of the following is not included in the computation of net cash provided by operating activities?
Cash received from customers.
Supplies used.
Payment of rent.
Purchase of insurance.
Supplies used.
