section 4

Question 1

Revenue Recognition Principle

Answer 1

TIMING OF REVENUES

revenues are to be recognized/recorded in the period in which they are earned, not necessarily when cash is received

Question 2

matching principle is also known as

Answer 2

Expense Recognition Principle

Question 3

Matching Principle

Answer 3

TIMING OF EXPENSES

expenses are to be recognized in the period in which those costs provide benefit to the business operations

Question 4

Accrual Basis Accounting

Answer 4

deals with the timing of revenues and expenses and two principles:
—Revenue Recognition Principle
—Matching Principle

Question 5

unearned indicates

Answer 5

a liability

Question 6

prepaid indicates

Answer 6

an asset

Question 7

When are nominal accounts closed?

Answer 7

at the end of an accounting period (usually year by year)

Question 8

Nominal accounts amounts are transferred to

Answer 8

Retained earnings

Question 9

When are closing entries made?

Answer 9

at the end of an accounting period

Question 10

2 objectives of closing entries:

Answer 10

1. all Revenue, Expense, and Dividend accounts must be reset to zero to start the next accounting period
2. the Retained Earnings account must be updated to include the amount of net income (revenues—expenses) less dividends for the current year

Question 11

what kind of account is paid-in-capital?

Answer 11

owners equity

Question 12

payable indicates

Answer 12

liability

Question 13

Nominal Account

Answer 13

all income statement accounts (revenues and expenses) and the dividends account

Question 14

Which of the following is an advantage of using special journals in a manual accounting system?

Answer 14

They reduce the number of postings required during an accounting period.

Question 15

What is directly reflected in a statement of retained earnings?

Answer 15

Dividends