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The term “recognition” means to
report an economic event in the financial statements.
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The term “accrual” describes an earnings event that is
recognized before cash is paid or received
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The cost of a resource that will produce revenue in the
future is an asset.
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Adjusting entries never affect a business’s Cash account.
true
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An adjusting entry to accrue salary expense is a
claims exchange transaction.
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Revenues are temporary accounts, but liabilities are not
true
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In the closing process, the amounts in temporary accounts are moved to
Retained Earnings, a permanent account.
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Immediately after closing, every temporary account has a balance of
$0.
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Accounts that are closed include expenses and
dividends
not UNEARNED REVENUES
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After closing, the only accounts with non-zero balances are
assets, liabilities, and equity.
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Two of the steps in the accounting cycle are adjusting the accounts and closing the accounts.
true
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Cash-basis accounting often fails to match expenses with revenues.
true
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The matching concept leads accountants to select the recognition alternative that produces the lowest amount of net income.
False
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A company sometimes recognizes a revenue or expense, even though the corresponding cash collection or payment does not occur in the same accounting period.
true
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The collection of an account receivable is a claims exchange transaction.
False
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Providing services to customers on account is an
asset source transaction.
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An adjusting entry that decreases Unearned Service Revenue and increases Service Revenue is a claims exchange transaction.
True
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Revenue is the economic benefit derived from operating a business.
True
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Often, the recognition of revenue is accompanied by an increase in liabilities.
False
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Realization means
the collection of cash
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an example of an accrual
interest earned but not received
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The entry to recognize salary expense incurred but not yet paid involves which of
the following?
an increase in liabilities
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Recording accrued salary expense at the end of an accounting period causes an increase in
Salaries Expense and
an increase in a liability
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Which of the following costs is considered an expense?
payment of cash for current utility bill, payment of cash for equipment or purchasing supplies would be assets
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Which of the following costs is considered an asset?
purchase of equipment for cash
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The adjustment to record the completion of services for which clients had paid in
advance would involve which of the following?
a decrease in liabilities and an increase in equity
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If a company purchases supplies on account, this transaction would cause
liabilities to increase
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Sort cash, accounts payable, common stock, land, accounts receivable
- cash=assets
- accounts payable=liable
- common stock= stockholder's equity
- land=assets
- Accounts receivable= assets
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Recognition of revenue may result in which of the following?
an increase in assets
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Which of the following financial statement elements is closed at the end of an
accounting cycle?
Expenses
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Which of the following accounts would not be closed at the end of an accounting
cycle?
Common Stock
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The matching concept refers to the "matching" of:
expenses and revenues
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The result of the matching process is best reported on which financial statement?
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Which of the following accounts is a permanent account?
- Unearned
- Subscription Revenue
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asset source transaction
increases business's assets (cash) and its stockholders' equity
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asset exchange transaction
reflects changes in the composition of assets
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Revenue
represents an economic benefit a company obtains by providing customers with goods and services
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All asset use transactions do what
decrease the total amount of assets and the total amount of claims on assets (liabilities or stockholders' equity).
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The assets and services consumed to generate revenue are called
expenses
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assets=
liabilities+common stock+ retained earnings
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asset source transaction
increase the total amount of assets and increase the total amount of claims
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asset exchange transactions
decrease one asset and increase another asset.Total amount of assets is exchanged
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asset use transactions
decrase the total amount of assets and the total amount of claims
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income statement
matches the revenues that occur during a period when operating a business.
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If expenses are greater than revenues, the difference is called
net loss
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The practice of pairing revenues with expenses on the income statement is called the
matching statement
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balance sheet
total assets balance with equal liabilities and stockholder's equity.
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statement of cash flows
explained how a company obtained and used cash during the accounting period.
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financing activities include
obtaining cash (inflow) from owners or paying cash (outflow) to owners (dividends)
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investing activities involve
paying cash (outflow) to purchase long-term assets or receiving cash (inflow) from selling long-term assets.
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operating activities involve
receiving cash (inflow) from revenue and paying cash (outflow) for expenses.
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At the end of the accounting period, revenue, expense, and dividend accounts data is moved to
retained earnings
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transferring account balances into retained earnings is called
closing
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since revenue, expense, and dividend accounts are closed each period, they are called
temporary accounts
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--------- is a permanent account, bebcause it carries forward from one accounting period to the next
retained earnings
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