measuring business transactions

Question 1

time period assumption

Answer 1

financial statements need to be prepared at regular intervals

Question 2

revenue recognition

Answer 2

revenues should be recorded when it has been earned

Question 3

recognition criteria for expenses

Answer 3

matching objective during the period

Question 4

accrual basis

Answer 4

recognized when cash is received or paid

Question 5

cash bias

Answer 5

recognized when cahs is received or paid

Question 6

adjusting entries

Answer 6

accrual basis accounting requires adjusting entries at the end of the period in order to produce correct balances for the financial statements

Question 7

adjustments: prepaid expenses, amortization, supplies and unearned revenues (steps)

Answer 7

initial recording: asset or liability
time or economic events
adjustment

Question 8

adjusting prepaid expenses (2)

Answer 8

asset when paid -> transfer expired portion to expense accounts
expense when paid -> transfer the unused portion of prepaid from expense to the asset account

Question 9

adjusting supplies (2)

Answer 9

asset -> subtract supplies left and expense supplies used
prepaid in expense -> inventory left

Question 10

basis for amortization

Answer 10

depreciate cost - salvage value

Question 11

amortization at the end of the years

Answer 11

the basis for amortization/nb of years

Question 12

adjusting amortization

Answer 12

amortization expense
accumulated amortization

Question 13

adjusting unearned revenues (2)

Answer 13

liability when cash is received -> transfer unearned portion to revenue accounts
revenues when cash is received -> transfer unearned portion of the payment from the revenue account to unearned account

Question 14

adjusting accrued expenses and revenues

Answer 14

expenses and revenues that have not led to the recording an asset or liability
end of period adjustments
- recording the expense and liability at the same time
- recording the revenue and the asset at the same time

Question 15

adjusting expense

Answer 15

…. expense
… payable