Chapter 3—The Adjusting Process

MULTIPLE CHOICE
11.Deferred revenue is revenue that is
a earned and the cash has been received
.
b earned but the cash has not been received
.
c not earned and the cash has not been received
.
d not earned but the cash has been received
.
ANS: D PTS: 1 DIF: Difficult OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries

12. Adjusting entries are

a the same as correcting entries
.
b needed to bring accounts up to date and match revenue and expense
.
c optional under generally accepted accounting principles
.
d rarely needed in large companies
.
ANS: B PTS: 1 DIF: Moderate OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries

13. Adjusting entries affect at least one

a income statement account and one balance sheet account
.
b revenue and the drawing account
.
c asset and one owner's equity account
.
d revenue and one capital account
.
ANS: A PTS: 1 DIF: Moderate OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries

14. The general term employed to indicate an expense that has not been paid and has not yet been recognized
in the accounts by a routine entry is
a capital
.
b deferral
.
c accrual
.
d inventory
 .
ANS: C PTS: 1 DIF: Easy OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries

15. Which of the following is not a characteristic of accrual basis of accounting?

a Revenues and expenses are reported in the period in which cash is received or paid
.
b Revenues are reported in the income statement in the period in which they are earned
.
c Supports the matching concept
.
d All are correct.
.
ANS: A PTS: 1 DIF: Difficult OBJ: 03-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-04-Cash vs. Accrual