Test Bank For Accounting 26th Edition Carl Warren James M Reeve Jonathan Duchac

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Test Bank For Accounting 26th Edition Carl Warren James M Reeve Jonathan Duchac

CHAPTER 3:  THE ADJUSTING PROCESS

1. The system of accounting where revenues are recorded when they are earned and expenses are recorded when they are incurred is called the cash basis of accounting.
   1. True
   2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. Generally accepted accounting principles require accrual-basis accounting.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.
   1. True
   2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

4.The matching concept requires expenses be recorded in the same period that the related revenue is recorded.

1. True
2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. For most large businesses, the cash basis of accounting will provide accurate financial statements for user needs.
   1. True
   2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. An example of deferred revenue is Unearned Rent.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. If the debit portion of an adjusting entry is to an asset account, then the credit portion must be to a liability account.
   1. True
   2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions

ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. Proper reporting of revenues and expenses in a period is due to the accounting period concept.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. The revenue recognition concept requires that the reporting of revenue be included in the period when cash for the service is received.
   1. True
   2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

11.Revenues and expenses should be recorded in the same period to which they relate.

1. True
2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.ACBSP.APC.04 – Cash vs. Accrual ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. The matching concept supports matching expenses with the related revenues.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of accounting.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.3-01 – 3-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

14.The updating of accounts is called the adjusting process.

1. True
2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions

ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. Adjusting entries affect balance sheet accounts at the exclusion of income statement accounts.
   1. True
   2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering 

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. Adjusting entries affect only expense and asset accounts.
   1. True
   2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering 

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

17.An adjusting entry would adjust revenue so it is reported when earned and not when cash is received.

1. True
2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering 

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. An adjusting entry would adjust an expense account so the expense is reported when incurred.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering 

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

1. An adjusting entry to accrue an incurred expense will affect total liabilities.
   1. True
   2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering 

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.07 – Adjusting Entries

ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

20.The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and deferred revenue has never been recorded.

1. True
2. False

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering 

LEARNING OBJECTIVES: ACCT.WARD.16.03-01 – 03-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.04 – Cash vs. Accrual

ACCT.ACBSP.APC.07 – Adjusting Entries ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic