Adjusting entries Test 1

Question 1

accrual basis of accounting VS cash basis of accounting

Answer 1

accrual basis of accounting: revenues and their related expenses are reported on the income statement in the period in which a service has been performed or a product has been delivered. Cash may or may not be received from customers during this period.

cash basis of accounting: revenues and expenses are reported on the income statement in the period in which cash is received or paid.

Question 2

who uses the Cash basis of accounting?

who uses the Accrual basis of accounting?

Answer 2

small businesses

Large businesses

Question 3

revenue recognition principle

Answer 3

match: revenue w/ expense

(The process of recognizing revenues is called revenue recognition)

Question 4

Matching concept (expense recognition principle)

Answer 4

match: expense w/ revenue

Question 5

Some accounts require adjustments for
the following reasons: (3)

Answer 5

Some revenues and expenses may be unrecorded at the end of the accounting period.

Some expenses are not recorded daily. (supplies)

Some revenues and expenses are incurred as time passes rather than as separate transactions. (unearned+ rent)