Accrual Accounting

General Instructions: Encircle the best answer.

Part 1 Multiple Choice

1. Deferred revenues should be reported as

a. contributed capital on the balance sheet.
b. expenses on the income statement.
c. income on the income statement.
d. liabilities on the balance sheet.

2. An adjusting entry made to record accrued interest on a note payable due next year consists of
a debit to
a. Interest Expense and a credit to Cash
b. Interest Expense and a credit to Interest Payable
c. Interest Expense and a credit to Notes Payable.
d. Interest Receivable and a credit to Interest Earned

3. An accrued revenue should be recorded by a

a. buyer when a service is received on payment of cash.
b. seller when customer pays for service before the service rendered.
c. seller when service is rendered before receipt of cash.
d. seller when a service is rendered on receipt of cash.

4. The adjustment for that portion of revenue received in advance which now has been earned is
to debit
a. Cash and credit Unearned Revenues
b. Service Revenues and credit Unearned Revenues.
c. Unearned Revenues and credit Cash.
d. Unearned Revenues and credit Service Revenues

5. Accrued expenses should be reported as

a. assets on the balance sheet.
b. expenses on the income statement.
c. liabilities on the balance sheet.
d. revenues on the income statement.

6. Deferred expenses should be reported as

a. assets on the balance sheet.
b. expenses on the income statement.
c. income on the income statement.
d. liabilities on the balance sheet.

7. The adjustment for that portion of revenue received in advance which now has been earned is
to debit
a. Cash and credit Unearned Revenues
b. Service Revenues and credit Unearned Revenues.
c. Unearned Revenues and credit Cash.
d. Unearned Revenues and credit Service Revenues

1
8. Which of the following accounts would likely NOT need to be adjusted at year-end?
a. Land
b. Office Supplies
c. Prepaid Advertising
d. Unearned Revenues

9. Which of the following is an example of an accrual?

a. Bookkeeping fees collected but not yet earned
b. Equipment purchased for use in the business
c. Interest earned but not yet received.
d. Six months' rent paid in advance

10. Which of the following accounts would probably need to be adjusted at year-end?
a. Land
b. Notes Payable
c. Supplies
d. Withdrawals