FAR — Financial Accounting & Reporting — Quiz 11

Questions in this quiz (10)

1. Which financial statement element represents increases in equity from non-primary business activities?

   • Revenue
   • Gain
   • Liability
   • Expense

2. Which accounting concept requires that expenses be recognized in the same period as related revenues?

   • Consistency principle
   • Matching principle
   • Historical cost principle
   • Going concern assumption

3. Which financial statement shows changes in retained earnings during a period?

   • Income statement
   • Statement of retained earnings
   • Balance sheet
   • Statement of cash flows

4. Which financial statement element represents decreases in equity from primary business operations?

   • Loss
   • Expense
   • Liability
   • Asset

5. Which of the following best describes cash-basis accounting?

   • Revenues recognized when earned
   • Expenses recognized when incurred
   • Transactions recorded when cash is exchanged
   • Adjustments recorded at period end

6. A company delivers goods in March but receives payment in April. Under accrual accounting, when should revenue be recognized?

   • April when cash is received
   • March when goods are delivered
   • When invoice is issued
   • At the end of the quarter

7. Which adjusting entry is required when revenue is received before services are performed?

   • Accrued expense
   • Unearned revenue adjustment
   • Prepaid expense adjustment
   • Depreciation adjustment

8. Which adjusting entry records expenses that have been paid in advance?

   • Accrued expense
   • Prepaid expense adjustment
   • Accrued revenue
   • Unearned revenue

9. A company pays $24,000 for a two-year insurance policy on July 1. At the end of the first month, what adjusting entry is required?

   • Debit Insurance Expense $1,000; Credit Prepaid Insurance $1,000
   • Debit Insurance Expense $2,000; Credit Prepaid Insurance $2,000
   • Debit Prepaid Insurance $1,000; Credit Cash $1,000
   • Debit Cash $1,000; Credit Insurance Expense $1,000

10. Which account is typically debited when recording accrued revenues?

    • Revenue
    • Cash
    • Accounts receivable
    • Expense