MGMT 200 Chapter 3 Exam Questions and Answers Fully Solved Latest Version 2025-2026
In May, Just In Thyme, Inc. billed a customer $1,000 for services performed in May. In June,
Just In Thyme collected the $1,000. Which of the following is true assuming accrual accounting?
- Answers $1,000 of revenue should be recorded in May.
There is a cause-and-effect relationship between revenues and expenses that dictates: -
Answers when costs are recognized as expenses in the income statement.
In January, Pizza Company bought pizza ingredients on account for $100, with payment due to
the supplier in April. The pizza ingredients were used for pizzas made in January. In which
month should Pizza Company record the cost of the pizza ingredients as an expense? -
Answers January
Reporting revenues only when cash is received and expenses only when cash is paid is called
the _________ basis of accounting. - Answers cash
On May 1, Cut Above, Inc., collected $3,000 from customers to mow their lawns in June. Under
cash-basis accounting, revenues in May will equal: - Answers $3,000
In May, Sea the World Cruises, Inc. collected $1,000 cash in advance from a customer for
services to be performed in June. Which of the following is true assuming accrual accounting? -
Answers $1,000 of revenue should be recorded in June.
The difference between cash-basis and accrual-basis accounting is the ________ of when
revenues and expenses are recorded. - Answers timing
Consistent with accrual-basis accounting, expenses should be recognized - Answers in the
period when the related revenue is generated
Under accrual-basis accounting, which of the following result in an expense being recorded in
May? (Select all that apply.) - Answers The company pays cash in April for supplies used in May.
The company pays cash in June for salaries earned in May.
Under cash-basis accounting, (Select all that apply.) - Answers expenses are recorded when
cash is paid.
revenues are recorded when cash is received.
On December 30, Superior Strategies, Inc., collected $10,000 in advance from clients relating to
consulting engagements to be performed during January of the following year. Under cash-
basis accounting, revenues recorded in December will equal: - Answers $10,000
Accrual basis accounting differs from cash basis accounting in that accrual basis accounting
records Blank______. (Select all that apply.) - Answers expenses in the period incurred, even
though cash has not yet been paid
, revenues in the period when the revenue is earned, even though the cash has not yet been
collected
Adam Corporation uses the cash-basis of accounting. Adam Corporation should record
expenses when: - Answers Paid
Which of the following is (are) permitted under current U.S. GAAP? - Answers Accrual-basis
accounting
Under the accrual basis of accounting, costs used to generate revenue are recorded as
expenses: - Answers in the same period as related revenue.
The accounting basis that records revenues in the period that goods and services are provided
to customers is referred to as - Answers accrual-basis accounting.
______ are recorded in the period that goods and services are provided to customers and ______
are recorded in the period that costs are incurred while providing those goods and services. -
Answers Revenues; expenses
Adjusting entries: (Select all that apply.) - Answers are needed before financial statement
preparation.
update the accounts to their proper balances.
Cash-basis accounting Blank______. (Select all that apply.) - Answers is generally not accepted
in preparing financial statements
records revenues when collected and expenses when paid
True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts
that have been used up or expired during the period. - Answers False
Which of the following pre-payments requires an adjusting entry at the end of the year? -
Answers On November 1, the company pays rent for the next six months.
_________-basis accounting helps measure and report revenues and expenses in a way that
clearly represents the net income of the company. - Answers Accrual
Reporting revenues when goods or services are provided and expenses in the period they are
incurred to generate related revenues is referred to as _________-basis accounting. - Answers
Accrual
_________ occur when the cash flow occurs after either the expense is incurred or the revenue is
earned. - Answers Accruals
Adjusting entries are made at the _______ of the accounting period, while daily transactions are
made throughout the accounting period. - Answers end
In May, Just In Thyme, Inc. billed a customer $1,000 for services performed in May. In June,
Just In Thyme collected the $1,000. Which of the following is true assuming accrual accounting?
- Answers $1,000 of revenue should be recorded in May.
There is a cause-and-effect relationship between revenues and expenses that dictates: -
Answers when costs are recognized as expenses in the income statement.
In January, Pizza Company bought pizza ingredients on account for $100, with payment due to
the supplier in April. The pizza ingredients were used for pizzas made in January. In which
month should Pizza Company record the cost of the pizza ingredients as an expense? -
Answers January
Reporting revenues only when cash is received and expenses only when cash is paid is called
the _________ basis of accounting. - Answers cash
On May 1, Cut Above, Inc., collected $3,000 from customers to mow their lawns in June. Under
cash-basis accounting, revenues in May will equal: - Answers $3,000
In May, Sea the World Cruises, Inc. collected $1,000 cash in advance from a customer for
services to be performed in June. Which of the following is true assuming accrual accounting? -
Answers $1,000 of revenue should be recorded in June.
The difference between cash-basis and accrual-basis accounting is the ________ of when
revenues and expenses are recorded. - Answers timing
Consistent with accrual-basis accounting, expenses should be recognized - Answers in the
period when the related revenue is generated
Under accrual-basis accounting, which of the following result in an expense being recorded in
May? (Select all that apply.) - Answers The company pays cash in April for supplies used in May.
The company pays cash in June for salaries earned in May.
Under cash-basis accounting, (Select all that apply.) - Answers expenses are recorded when
cash is paid.
revenues are recorded when cash is received.
On December 30, Superior Strategies, Inc., collected $10,000 in advance from clients relating to
consulting engagements to be performed during January of the following year. Under cash-
basis accounting, revenues recorded in December will equal: - Answers $10,000
Accrual basis accounting differs from cash basis accounting in that accrual basis accounting
records Blank______. (Select all that apply.) - Answers expenses in the period incurred, even
though cash has not yet been paid
, revenues in the period when the revenue is earned, even though the cash has not yet been
collected
Adam Corporation uses the cash-basis of accounting. Adam Corporation should record
expenses when: - Answers Paid
Which of the following is (are) permitted under current U.S. GAAP? - Answers Accrual-basis
accounting
Under the accrual basis of accounting, costs used to generate revenue are recorded as
expenses: - Answers in the same period as related revenue.
The accounting basis that records revenues in the period that goods and services are provided
to customers is referred to as - Answers accrual-basis accounting.
______ are recorded in the period that goods and services are provided to customers and ______
are recorded in the period that costs are incurred while providing those goods and services. -
Answers Revenues; expenses
Adjusting entries: (Select all that apply.) - Answers are needed before financial statement
preparation.
update the accounts to their proper balances.
Cash-basis accounting Blank______. (Select all that apply.) - Answers is generally not accepted
in preparing financial statements
records revenues when collected and expenses when paid
True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts
that have been used up or expired during the period. - Answers False
Which of the following pre-payments requires an adjusting entry at the end of the year? -
Answers On November 1, the company pays rent for the next six months.
_________-basis accounting helps measure and report revenues and expenses in a way that
clearly represents the net income of the company. - Answers Accrual
Reporting revenues when goods or services are provided and expenses in the period they are
incurred to generate related revenues is referred to as _________-basis accounting. - Answers
Accrual
_________ occur when the cash flow occurs after either the expense is incurred or the revenue is
earned. - Answers Accruals
Adjusting entries are made at the _______ of the accounting period, while daily transactions are
made throughout the accounting period. - Answers end
