ACC 101 Test questions and answers
graded A+
Accrual based accounting - ANS✅✅Record transactions that change a company's financial
statements in the periods in which the events occur.
Cash based accounting - ANS✅✅-recording transaction when cash is received
-fails to record revenue that is earned but has not received the cash for yet
-is not in accordance with GAAP
Revenue recognition principle - ANS✅✅requires that companies recognize revenue in the
accounting period in which the service obligation is satisfied
expense recognition principle - ANS✅✅expenses be matched with revenues
adjusting entries - ANS✅✅-ensures the correct reporting of amounts on financial statements
-consists of deferrals and accruals
deferrals - ANS✅✅-Adjusting entries for either prepaid expenses or unearned revenues.
-cost or revenues that are recognized at a later date then the point when cash was originally
exchanged.
accruals - ANS✅✅Adjusting entries for either accrued revenues (revenue earned but not received
in cash) or accrued expenses (expenses incurred but not paid).
prepaid expense - ANS✅✅-cost that expire with the passing of time or through use. (ex. supplies,
insurance)
-prior to adjustment assets are overstated, liabilities are understated
useful life - ANS✅✅the period of service that a asset is good for
depreciation - ANS✅✅allocating the cost of an asset to expense over its useful life
graded A+
Accrual based accounting - ANS✅✅Record transactions that change a company's financial
statements in the periods in which the events occur.
Cash based accounting - ANS✅✅-recording transaction when cash is received
-fails to record revenue that is earned but has not received the cash for yet
-is not in accordance with GAAP
Revenue recognition principle - ANS✅✅requires that companies recognize revenue in the
accounting period in which the service obligation is satisfied
expense recognition principle - ANS✅✅expenses be matched with revenues
adjusting entries - ANS✅✅-ensures the correct reporting of amounts on financial statements
-consists of deferrals and accruals
deferrals - ANS✅✅-Adjusting entries for either prepaid expenses or unearned revenues.
-cost or revenues that are recognized at a later date then the point when cash was originally
exchanged.
accruals - ANS✅✅Adjusting entries for either accrued revenues (revenue earned but not received
in cash) or accrued expenses (expenses incurred but not paid).
prepaid expense - ANS✅✅-cost that expire with the passing of time or through use. (ex. supplies,
insurance)
-prior to adjustment assets are overstated, liabilities are understated
useful life - ANS✅✅the period of service that a asset is good for
depreciation - ANS✅✅allocating the cost of an asset to expense over its useful life
