#1
Which accounting method records revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid?
Cash Accounting
Accrual Accounting
Modified Cash-Basis Accounting
Cost Accounting
#2
What is the purpose of the revenue recognition principle in accrual accounting?
To delay recognizing revenue until cash is received
To recognize revenue when it is earned and realizable
To match expenses with revenues
To prioritize recognizing cash over revenue
#3
What is the key difference between cash accounting and accrual accounting?
Recognition of cash transactions
Timing of revenue and expense recognition
Use of financial statements
Recording of fixed assets
#4
What is the purpose of the accrual accounting system?
To simplify financial reporting
To provide a cash basis of accounting
To match revenues and expenses in the appropriate period
To eliminate the need for adjusting entries
#5
Which financial statement reports the financial performance of a business over a specific period?
Balance Sheet
Income Statement
Statement of Cash Flows
Retained Earnings Statement
#6
What is the primary advantage of accrual accounting over cash accounting?
Simplicity
Timely cash tracking
Matches revenues and expenses in the correct period
Lower initial costs
#7
Under accrual accounting, when is revenue recognized?
When cash is received
When the product is delivered or service is performed
At the end of the fiscal year
When the invoice is sent
#8
Which financial statement is not affected by adjusting entries?
Balance Sheet
Income Statement
Statement of Cash Flows
Retained Earnings Statement
#9
What is the purpose of the expense recognition principle in accrual accounting?
To recognize expenses when paid
To delay recognizing expenses until cash is available
To match expenses with revenues
To prioritize recognizing cash over expenses
#10
In accrual accounting, which type of account is affected by the adjusting entry for accrued expenses?
Asset
Liability
Equity
Revenue
#11
What is the adjusting entry required when unearned revenue is earned?
Debit Unearned Revenue, Credit Revenue
Debit Revenue, Credit Unearned Revenue
Debit Cash, Credit Unearned Revenue
Debit Unearned Revenue, Credit Cash
#12
In accrual accounting, which financial statement is directly impacted by adjusting entries?
Balance Sheet
Income Statement
Statement of Cash Flows
Retained Earnings Statement
#13
Which adjusting entry is made for an expense that has been incurred but not yet paid?
Debit Expense, Credit Cash
Debit Cash, Credit Expense
Debit Expense, Credit Accounts Payable
Debit Accounts Payable, Credit Expense
#14
Under accrual accounting, what is the purpose of the contra-asset account?
To decrease liabilities
To decrease assets
To increase expenses
To adjust for depreciation
#15
Under accrual accounting, how does the recognition of prepaid expenses impact financial statements?
Increases assets and decreases expenses
Decreases assets and increases expenses
Increases assets and increases expenses
Decreases assets and decreases expenses