Chapter 4 - Results for True/False Quiz https://tools.mheducation.ca/college/larson10/student/olc/10fal_tf_04.

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Results for True/False Quiz

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You correctly answered 16 questions for a score of 100 percent.

4-1. Recognizing revenue when cash is received and recognizing expenses when
they are paid in cash is adherence to the accrual basis of accounting.

100% True / False

You answered correctly! Recognizing revenues and expenses when

cash is exchanged is adherence to cash-basis accounting. Accrual-
basis accounting requires the recognition of revenue when earned and
the recognition of expenses when incurred.

4-2. Because of its simplicity and ease of use, most businesses keep their
accounting records on the cash basis of accounting.

True / False

You answered correctly! For those businesses where prepaid,

unearned, and accrued items are unimportant, the cash basis is
acceptable. However, most businesses use the accrual basis of
accounting. Cash basis accounting makes no attempt to match
revenues and expenses.

4-3. Cash basis accounting matches revenues and expenses and is consistent with
accepted accounting principles.

True / False

You answered correctly! Cash basis accounting makes no attempt to

match revenues and expenses. It matches only cash receipts and cash
disbursements. Cash basis is not consistent with accepted accounting
principles.

4-4. The purpose of an adjusting entry in which insurance expense is debited and
prepaid insurance is credited, is to remove the expired portion of the prepaid
expense.

True / False

You answered correctly! The time-period concept assumes that the

life of a business can be divided into equal increments. Insurance cost
is allocated over equal increments for the period of coverage to adhere
to the matching principle.

4-5. Recording amortization is a cost allocation process.

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True / False

You answered correctly! A debit to Amortization Expense and a credit

to Accumulated Amortization, Equipment is allocating a fair share of the
equipment cost as an expense for the period that the equipment was
used to help generate revenues.

4-6. Amortization expense is an example of a contra account.

True / False

You answered correctly! Accumulated Amortization is an example of a

contra account. A contra account's balance is subtracted from the
balance of an associated account to provide more information in the
financial statements. Amortization expense is the cost of using the
asset for the specific accounting period.

4-7. For every accrued expense there is an offsetting and equal amount of liability.

True / False

You answered correctly! Accrued expenses are expenses incurred

(they have happened) but are not yet paid. Recognition of the expense
requires the creation of a current liability. The expense is paid later with
the liquidation of the liability.

4-8. Accounts receivable represent accrued revenue.

True / False

You answered correctly! Accrued revenue is revenue earned but not

yet received. The adjustment process requires the accrual of revenue
earned but not yet received by debiting a receivable account and
crediting an appropriate revenue account.

4-9. A balance sheet prepared on one page in a vertical format that shows the
assets above the liabilities and the liabilities above the owner's equity is called an
account form or balance form balance sheet.

True / False

You answered correctly! The balance sheet described is called a

report form balance sheet. Account form balance sheets have assets on
the left side of the page and liabilities and owner's equity on the right
side of the page.

4-10. Revenue recognition and matching are two of the main features of cash basis
accounting.

True / False

You answered correctly! Accrual accounting makes every attempt to

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match the revenues of the period against the expenses and costs of the
period. Revenues are always recognized when they are earned, not
when they are received. Cash basis accounting does not match
revenues and expenses and recognizes these items only when cash is
received or paid.

4-11. When cash is received in advance, the most common entry would be to credit
a revenue account.

True / False

You answered correctly! An alternative method to recording cash

received in advance is to record the amount directly into a revenue
account and then adjust the account later, if necessary, to report any
unearned revenues. The most common method is to credit a liability
account for cash received in advance.

4-12. Before the adjusting entries are recorded, prepaid expense accounts are
overstated and expense accounts are understated.

True / False

You answered correctly! An adjusting entry debiting Supplies

Expense and crediting Supplies will lower the balance of the asset
account and increase the balance of the expense account.

4-13. Before the adjusting entries for accrued revenues are recorded, assets are
overstated and revenues are overstated.

True / False

You answered correctly! An adjusting entry debiting Accounts

Receivable and crediting Fees Earned will increase assets and increase
revenues. Prior to the adjustment these accounts were understated.

4-14. Unearned revenues are also called deferred revenues.

True / False

You answered correctly! Cash received in advance is usually

recorded as a liability. Cash received in advance for services to be
completed in the future is an example of an unearned revenue or
deferred revenue. The revenue will be recorded as earned when the
services paid for have been completed.

4-15. Accumulated Amortization, Equipment is classified as an expense account.

True / False

You answered correctly! Accumulated Amortization, Equipment is a

contra-asset account linked to the Equipment account in the chart of
accounts and on the balance sheet. It accumulates the total

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amortization taken over the life of the asset. Amortization Expense,

Equipment is an expense account.

4-16. Salaries were accrued for the last few days in March. They are now being
paid in the month of April. This entry will debit Salaries Expense and credit Cash.

True / False

You answered correctly! The expense was recorded in the March

adjusting entries and is not an expense for April. The April entry is a
debit to Salaries Payable and a credit to Cash.

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