1. An accounting time period that is one year in length is called:
A. a fiscal year.
B. an interim period.
C. the time period assumption.
D. a reporting period.
2. In a service-type business, revenue is recognized:
A. when cash is received.
B. at the end of the month.
C. when the service is performed.
D. at the end of the year.
3. The expense recognition principle matches:
A. customers with businesses.
B. assets with liabilities.
C. creditors with businesses.
D. expenses with revenues.
4. A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be
recognized?
A. December 1
B. December 10
C. December 5
D. November 30
5. A furniture factory’s employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in
A. February.
B. either January or February depending on when the pay period ends.
C. January.
D. the period when the workers receive their checks.
6. The following is selected information from Windsor, Inc. for the fiscal year ending October 31, 2022.
| Cash received from customers | $302000 |
| Revenue recognized | 446000 |
| Cash paid for expenses | 160000 |
| Cash paid for computers on November 1, 2021 that will be used for 3 years
| 52000 |
| Expenses incurred including any depreciation
| 200000 |
| Proceeds from a bank loan, part of which was used to pay for the computers
| 100000 |
Based on the accrual basis of accounting what is Windsor’s net income for the year ending October 31, 2022?
A. $210000
B. $262000
C. $246000
D. $260000
7. Adjustments are made to ensure that:
A. expenses are recognized in the period in which they are incurred.
B. revenues are recorded in the period in which the performance obligation is satisfied.
C. balance sheet and income statement accounts have correct balances at the end of an accounting period.
D. All of these answer choices are correct.
8. Adjustments are:
A. made to balance sheet accounts only.
B. made whenever management desires to change an account balance.
C. not necessary if the accounting system is operating properly.
D. usually required before financial statements are prepared.
9. Each of the following is a major type (or category) of adjustment except
A. prepaid expenses.
B. accrued revenues.
C. earned expenses
D. accrued expenses.
10. Which of the following items describe the two classifications of adjustments?
A. Accruals and advances.
B. Deferrals and postponements.
C. Postponements and advances.
D. Accruals and deferrals.