Question 1

A contra account has two characteristics: (1)a contra account is paired with a companion account,and (2)a contra account's normal balance is the same as that of the companion account.

Accepted Answer

A contra account's normal balance is opposite to that of the companion account. For example, if the companion account has a debit balance, the contra account will have a credit balance, and vice versa.

Question 2

The matching principle means which of the following?

Accepted Answer

The matching principle states that expenses should be matched with the revenues they help to generate. Therefore, expenses are subtracted from revenues to determine the net income or loss for a period.

Question 3

Blum Services has the following unadjusted balances at year-end.
 $$\begin{array} { |l | r | } 
\hline \text { Cash } & \$ 12,900 \
\hline \text { Prepaid insurance } & 2,000 \
\hline \text { Office supplies } & 1,300 \
\hline \text { Office equipment } & 10,500 \
\hline \text { Accumulated depreciation-office equipment } & 3,500 \
\hline \text { Accounts payable } & 2,900 \
\hline \text { Salaries payable } & - 0- \
\hline \text { Unearned service revenue } & 4,500 \
\hline \text { A.L.Blum, capital } & 11,750 \
\hline \text { A.L.Blum, drawing } & 5,600 \
\hline \text { Service revenue } & 13,350 \
\hline \text { Salary expense } & 3,700 \
\hline \text { Depreciation expense } & - 0 - \
\hline \text { Supplies expense } & - 0 - \
\hline \text { Insurance expense } & - 0 - \
\hline
\end{array}$$ The following information is available to use in making adjusting entries.
a.Office supplies on hand at year-end: $250
b.Prepaid insurance expired during the year: $325
c.Unearned revenue remaining at year-end: $2,500
d.Depreciation expense for the year: $1,800
e.Accrued salaries at year-end: $900
Using the work sheet below,prepare the trial balance,the adjustments and the adjusted trial balance for Blum Services.

Accepted Answer

The answer of Blum Services has the following unadjusted balances...

Question 4

Which of the following statements BEST mirrors the matching principle?

Accepted Answer

The matching principle is an accounting principle that requires expenses to be recorded in the same period as the related revenues. Therefore, option C, which states that the matching principle determines when to record expenses, best mirrors the matching principle. Options A and B are not accurate descriptions of the matching principle, and option D is incorrect because there is a clear answer that matches the description of the principle.

Question 5

Prepaid rent is an expense account.

Accepted Answer

Prepaid rent is not an expense account, it is a current asset account that represents rent paid in advance. The rent expense will be recognized in the period in which the rent applies.

Question 6

Employees of Robert Rogers,CPA worked during the last two weeks of December.They received their paychecks on January 2.The matching principle would require that which of the following accounts appear on the balance sheet for December 31?

Accepted Answer

Salaries payable should appear on the balance sheet for December 31 as the employees worked during the last two weeks of the month but did not receive their paychecks until January 2. This creates a liability that needs to be recognized on the balance sheet as of December 31 in accordance with the matching principle. The other options (A, C, D) are not relevant to this scenario.

Question 7

How do the adjusting entries differ from other journal entries?

Accepted Answer

Adjusting entries are unique because they are made at the end of an accounting period to update account balances before financial statements are prepared. They always involve at least one income statement account and one balance sheet account and do not directly affect cash, as they are adjustments for revenues earned or expenses incurred that have not yet been recorded.

Question 8

Robert Rogers,CPA owns a computer used for the company's business.The matching principle would require that which of the following accounts appear on the income statement for the year ended December 31?

Accepted Answer

The matching principle requires that expenses (such as depreciation) be matched with the revenues they helped to generate. Therefore, depreciation expense (option A) should appear on the income statement, while accumulated depreciation (option C) is a contra asset account and does not affect the income statement. Service revenue (option B) would also appear on the income statement, but it is not related to the question since it pertains to revenue rather than expenses. Equipment expense (option D) is not a common account and is not necessary for this question.

Question 9

The revenue principle guides accountants in which of the following ways?

Accepted Answer

The revenue principle specifically dictates when to record revenue, which is when it is earned or when goods or services are delivered.

Question 10

Employees of Robert Rogers,CPA worked during the last two weeks of December.They received their paychecks on January 2.The matching principle would require that which of the following accounts appear on the income statement for the year ended December 31?

Accepted Answer

The matching principle requires that expenses be recognized in the period in which the corresponding revenue is recognized. Therefore, the salary expense incurred by Robert Rogers, CPA during the last two weeks of December should be recognized in the income statement for the year ended December 31. Prepaid expense would be recognized on the balance sheet as an asset, salaries payable would be a liability, and unearned revenue would be revenue received in advance of services provided.

Question 11

Ensuring that accounting information is updated each period is the purpose of the:

Accepted Answer

The time-period concept requires that accounting information is updated for each period to ensure that financial statements accurately reflect the entity's financial position and performance during the period. The matching principle relates to aligning expenses with related revenue for the same period, the revenue principle guides when to recognize revenue, and the expense principle guides when to recognize expenses.

Question 12

Which of the following entries would be made as the result of the revenue principle?

Accepted Answer

The revenue principle requires that revenue be recorded when earned, regardless of when the cash is received. Option B correctly reflects the recognition of service revenue earned on account, increasing both Accounts Receivable and Service Revenue.

Question 13

Prepaid insurance is an asset account.

Accepted Answer

Prepaid insurance represents insurance premiums that have been paid in advance but have not yet expired. It is considered an asset because it represents a future economic benefit that the company will receive when the insurance coverage is utilized.

Question 14

Which of the following is the time-period concept?

Accepted Answer

The time-period concept in accounting ensures that financial information is reported in regular, consistent intervals, allowing for the comparison of financial performance over different periods.

Question 15

The purposes of the adjusting process are:

Accepted Answer

The adjusting process involves ensuring that financial statements accurately reflect a company's financial performance and position. This involves adjusting expenses and revenues to the proper accrual basis, as well as adjusting asset and liability balances to the proper accrual basis. Therefore, both options A and B are incorrect, as they only address one aspect of the adjusting process. Option D is incorrect, as the adjusting process is an important part of accounting and financial reporting.

Question 16

In accounting,the matching principle means to match which of the following?

Accepted Answer

The matching principle states that expenses should be recognized in the same accounting period as the revenues they helped to earn. Therefore, expenses should be matched to the related revenues. Option A is incorrect because there is no direct relationship between revenues and liabilities. Option B is incorrect because assets are not usually matched with expenses. Option D is also incorrect because liabilities are not usually matched with expenses.

Question 17

Robert Rogers,CPA owns a computer used by the business.The matching principle would require that which of the following accounts appear on the balance sheet for the year ended December 31?

Accepted Answer

The matching principle states that expenses should be matched with the revenue they generate. In this case, since Robert Rogers owns a computer used by the business, the cost of the computer should be reflected as an expense on the income statement over its useful life through depreciation. The corresponding account on the balance sheet would be Accumulated Depreciation, which represents the total amount of depreciation expense recognized over the life of the computer. Therefore, the correct choice is C, Accumulated Depreciation. Depreciation expense (A) and Equipment expense (D) would be reported on the income statement, while Service revenue (B) would not be related to the computer owned by Robert Rogers.

Question 18

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

Accepted Answer

The matching principle in accounting states that expenses should be recorded in the period in which they are incurred to generate revenues, regardless of when the payment is made. Entry C matches salary expense (an expense incurred) with salary payable (a liability account representing salaries that have been incurred but not yet paid), which aligns with the matching principle.

Question 19

To accrue revenue means that the cash receipt is recorded before the revenue is earned.

Accepted Answer

Accrual accounting requires that revenue is only recorded when it is earned, meaning when goods or services have been delivered or completed. Recording cash receipts before the revenue is earned would violate this principle and result in inaccurate financial statements. This method of accounting is called cash basis accounting.

Question 20

Robert Rogers,CPA performed accounting services for a client in December.A bill was mailed to the client on December 30.Roberts received a check in the mail on January 5.The revenue principle would require that which of the following accounts appear on the balance sheet for December 31?

Accepted Answer

The revenue principle states that revenues should be recognized when earned, regardless of when cash is received. Since the accounting services were performed in December, revenue should be recognized in December, and the corresponding account on the balance sheet should be accounts receivable, as the client has not yet paid for the services. Prepaid expense would not be appropriate, as it represents payments made in advance for goods or services that have not yet been received. Unearned revenue represents payments received for goods or services that have not yet been delivered, which is not the case here. Accounts payable represents amounts owed to vendors for goods or services received, which is not applicable in this scenario.

Quiz 3: The Adjusting Process