Question

1. Under the cash basis of accounting, expense recognition generally does not follow revenue recognition.
True or False?

2. Accrued revenues are:

A. earned and recorded as liabilities before they are received.

B. received and recorded as liabilities before they are earned.

C. revenues that have not yet been received but have been earned and have been recorded for the first time by an adjusting entry.

D. earned and already received and recorded.

3. Revenue must be recognized when (or as) the company satisfies the performance obligation, regardless of whether or not the transaction price has been determined.

True or False?

4. Expenses paid before being used or consumed are initially recorded as liabilities.

True or False?

5. Revenue results when there is an increase in a liability or a decrease in an asset.

True or False?

6. An adjusted trial balance shows that:

A. debits equal credits in the ledger accounts after the adjusting entries have been made.

B. all accounts have the correct balance.

C. no posting errors have been made.

D. all journal entries have been made.

7. The shareholders' equity section of the statement of financial position uses the amount for Retained Earnings found on the:

A. statement of changes in equity.

B. the previous year's statement of financial position.

C. unadjusted trial balance.

D. adjusted trial balance.

Answer 1

1. FALSE

Under cash basis of accounting, expense recognition follows the revenue recognition.

2. Option (C) is correct

Accrued revenues are revenues that have not yet been received but have been earned and have been recorded for the first time by an adjusting entry.

3. False

Revenue must be recognized when the performance obligation is satisfied and transaction price has been determined.

4. FALSE

Expenses paid before being used or consumed are initially recorded as assets.

5. TRUE

6. Option (A) is correct

An adjusted trial balance shows that debits equal credits in the ledger accounts after the adjusting entries have been made.

7. Option (A) is correct