Which of the following is true of accrual basis accounting and cash basis accounting?
A. Accrual accounting records revenue only when it is earned.
B. Accrual accounting is not allowed under GAAP.
C. Cash basis accounting records all transactions.
D. All of the above are true.
The revenue recognition principle requires
A. expenses to be matched with revenue of the period.
B. revenue to be recorded only after the business has satisfied its performance obligation.
C. time to be divided into annual periods to measure revenue properly.
D. revenue to be recorded only after the cash is received.
Adjusting the accounts is the process of
A. updating the accounts at the end of the period.
B. subtracting expenses from revenues to measure net income.
C. zeroing out account balances to prepare for the next period.
D. recording transactions as they occur during the period.
Which of the following is an example of a deferral (or prepaid) adjusting entry?
A. Recording salaries expense for employees not yet paid.
B. Recording the usage of office supplies during the period.
C. Recording interest expense incurred on a notes payable not due until next year.
D. Recording revenue that has been earned but not yet received.
The adjusted trial balance shows
A. amounts that may be out of balance.
B. assets and liabilities only.