1.The ______ basis of accounting measurement recognizes revenues when resources are created as part of an organization’s operating activities.
2.The accrual basis of accounting is used because
a.companies may create or use resources in a different period than when they receive or pay the cash associated with those resources
b.it requires less time and effort than cash basis
c.it recognizes the collection and payment of cash
d.revenues are not recognized throughout the year
3.Accrual basis accounting
a.is an attempt to report net income at the earliest possible point in time
b.has the effect of delaying the payment of taxes until the latest point in time possible
c.captures the economic effects of an event in the period when the event occurred
d.leads to higher net income being reported than does cash flow accounting
4.Under accrual-basis accounting, sales made to customers on credit are usually reported as
c.cash from operating activities
5.Under accrual basis of accounting, revenue is recognized when
a.cash is received from customers to which a previous sale was made on account
b.goods or services are purchased from vendors
c.customers place orders for future delivery
d.goods or services are sold to customers
6.Which of the following is considered a liability?
7.Which of the following liabilities would reflect that a company is required to provide goods or services to a customer in the future?
8.Office supplies of $900 were purchased on account to be used in future months. One part of the accounting entry to record this event in the accounting system would be to
a.increase assets by $900
b.decrease assets by $900
c.increase expenses by $900
d.decrease liabilities by $900
9.Which of the following is an accurate representation of the accounting equation?
a.assets – liabilities = owners' equity + revenues – expenses
b.assets – expenses = liabilities + owners' equity + revenues
c.assets = liabilities + owners' equity + revenues + expenses
d.assets + expenses = liabilities + owners' equity – revenues
10.Which of the following statements is true?
a.accounts receivable is decreased when sales are made on account
b.accounts receivable is a revenue account
c.individual customer accounts are subsidiary accounts
d.accounts receivable are closed out at the end of the accounting period