Accounting Chapter 3

Unearned Revenue is classified as​ a(n) ________ account.

liability

To match expenses against revenues means to​ ________.

subtract expenses incurred during one period from revenues earned during that same period

Financial statements are prepared from the balances in​ a(n) ________.

adjusted trial balance

The matching principle states that​ ________.

all expenses should be recorded when they are incurred during the period

Bryson Accounting Services performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received a check by mail on January 5. Which of the following accounts should appear on the balance sheet as of December 31 as related to the services​ performed?

accounts receivable

At the end of the current​ year, the accountant for Colorful Graphics forgot to make an adjusting entry to accrue Wages Payable to the​ company's employees for the last week in December. The wages will be paid to the employees in January. Which of the following is an effect of this​ error?

Net income is overstated.

Kostner Financial Services performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received the​ client's check by mail on January 5. Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services​ performed?

service revenue

The entry to record depreciation includes a debit to the​ ________.

Depreciation Expense account

The accountant of Barnes Architectural Services failed to make an adjusting entry to record​ $7,000 of depreciation expense. Which of the following statements is​ true?

The total expenses will be understated.

Kittery Services purchased computers that are to be used in its consultancy services. Based on the matching​ principle, the related account that should appear on the income statement for the year ended December​ 31, 2016 is​ ________.

Depreciation Expense

The revenue recognition principle guides accountants in​ ________.

determining when to record revenues

The time period concept states that​ ________.

financial statements can be prepared for specific periods

When does a company account for revenue if it uses cash basis​ accounting?

when cash is​ received, either prior​ to, at the time​ of, or after the services are performed

The accountant for Sparks Electric failed to make an adjusting entry to record​ $3,000 of telephone expenses for the last two months of the year. Which of the following statements is​ true?

The total liabilities will be understated.

The accountant of Skyscrapers Architectural Services failed to make an adjusting entry to record​ $7,000 of depreciation expense. Which of the following statements is​ true?

The total assets will be overstated.

To fill in the unadjusted trial balance columns in a​ worksheet, the account balances before adjustments are copied directly from the​ ________.

ledger

The accountant of Zeus Legal Services failed to make an adjusting entry for supplies that had been used for the year. Assume the supplies were initially recorded as an asset. Which of the following statements is​ true?

The total assets will be overstated.

If a company is using accrual basis​ accounting, when should it record​ revenue?

when services are​ performed, even though cash may be received at a later date

The accountant for Hobson Electrical Repair failed to make an adjusting entry to record​ $5,000 of unpaid salaries for the last two weeks of the year. Which of the following statements is​ true?

The total expenses will be understated.

A company receives payment from one of its customers on August 5 for services performed on July 21. Which of the following entries would be recorded if the company uses accrual basis​ accounting?

cash 1,000

accounts receivable 1,000

The matching principle is also called the​ ________.

expense recognition principle

Which of the following accounting terms assumes that a​ business's activities can be divided into small segments and that financial statements can be prepared for specific​ periods, such as a​ month, quarter, or​ year?

time period concept

All of the accounts and the account balances of a company appear on the​ ________.

adjusted trial balance

The employees of Leicester Services Company worked the last two weeks of​ December, 2016. They received their paychecks on January​ 2, 2017. Which of the following accounts should appear on the income statement for the year ended December​ 31, 2016?

salaries expense

The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the​ ________ principle.

matching

The cash basis of accounting ignores​ ________.

payables

The entry to record depreciation includes a credit to the​ ________.

Accumulated Depreciation account

Which of the following entries would be made because of the matching​ principle?

salaies expense 1,000

salaries payable 1,000

Which of the following assumes that financial statements of a business can be prepared for specific​ periods?

time period concept

Which of the following accounting elements does the matching principle help to​ match?

expenses and revenues

Which of the following statements is true of accrual basis​ accounting?

Accrual basis accounting is required by Generally Accepted Accounting Principles​ (GAAP).

The accounts that are used in a worksheet are taken from and listed in the same order as the​ ________.

chart of accounts

The employees of Sinclair Services Company worked the last two weeks of December. They received their paychecks on January 2. Which of the following accounts should appear on the balance sheet as of December​ 31?

salaries payable

Which of the following is considered a fiscal​ year?

twelve months

The accountant of Delta Company failed to make an adjusting entry to record​ $6,000 of unearned service revenue that has now been earned. Assume the deferred revenue was initially recorded as a liability. Which of the following statements is​ true?

The total revenue will be understated.

The adjusted trial balance shows​ ________.

account balances after adjustments

The accountant for Jones Auto Repair failed to make an adjusting entry to record​ $5,000 of unpaid salaries for the last two weeks of the year. Which of the following is an effect of this​ omission?

the net income will be overstated

Revenue is earned when the business has​ ________.

delivered a good or service to the customer

The following extract was taken from the worksheet of Kelly Bakers for the year 2016.

Kelly Bakers

Worksheet

December​ 31, 2016

Account Names

Cash

Equipment

Accumulated Depreciation

minus−

Equipment

Unadjusted Trial Balance

Debit Credit

​$6,800

​15,900

​ $8,400

Adjusted Trial Balance

Debit Credit

​$6,800

​15,900

​ $10,000

For the above​ information, determine the amount of Depreciation Expense for the equipment used in the business

For the above​ information, determine the amount of Depreciation Expense for the equipment used in the business.

1,600

Which of the following accounts would be used under the accrual basis of​ accounting, but not under cash basis​ accounting?

unearned revenue

An internal document that helps summarize data for the preparation of financial statements is called a​ ________.

worksheet

Which of the following entries would be recorded by a company that uses the cash basis method of​ accounting?

Rent Expense 1,000

Cash 1,000

Harvard Financial Services purchased computers that are to be used in its consultancy services. Based on the matching​ principle, what​ account, other than​ Computers, should appear on the balance sheet as of December​ 31, 2016?

accumulated depreciation