CHAPTER 3 SMARTBOOK (McGraw Hill),
Questions and answers, VERIFIED.
Which of the following could be a logical or realistic accounting period for a business that is creating
financial statements? (Check all that apply.) - ✔✔-Six-month
One-month
One-year
Accrual basis accounting recognizes __________ (equity/revenues/expenses) when earned and records
__________ (revenues/expenses/liabilities) when ____________ (incurred/paid) in order to adhere to
the matching principle. - ✔✔-Revenues
Expenses
Incurred
The expense recognition (matching) principle aims to record _________ (expenses/assets/liabilities) in
the same accounting period as the _________ (expenses/revenues/assets) that are earned as a result of
those costs. This principle is a major part of the ____________ (timing/adjusting/esetimating) process -
✔✔-Expenses
Revenues
Adjusting
Place the steps in the adjusting process in the correct order in which they would be performed. - ✔✔-
Determine what the current account balance is
Determine what the correct account balance should be
Record an adjusting entry
Choose the statement below which is true regarding adjusting journal entries. - ✔✔-At least one income
statement account and one balance sheet account are always involved.
, Which of the following is (are) true regarding timeliness and the importance of periodic reporting?
(Check all that apply.) - ✔✔-The value of information is often linked to its timeliness
Useful information must reach decision makers frequently and promptly
Businesses report financial information at regular intervals to ensure timeliness of data
A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was
increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting
from the choices below. - ✔✔-Insurance expense would be debited for $300
Accrual basis accounting is defined as: (Check all that apply.) - ✔✔-An accounting system that uses the
adjusting process to recognize revenues when earned and expenses when incurred
An accounting system that uses the matching principle to determine when to recognize revenues and
expenses
An accounting system which is consistent with generally accepted accounting principles
$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month.
(The Supplies account was increased at the time of the initial purchase.) Demonstrate the required
adjusting journal entry by selecting from the choices below. (Check all that apply.) - ✔✔-Supplies would
be credited for $300
Supplies expense would be debited for $300
Which of the following statements describes the expense recognition (matching) principle? (Check all
that apply.) - ✔✔-Expenses should be matched in the same accounting period as the revenues that are
recognized as a result of those expenses
Matching of expenses with revenues is a major part of the adjusting process
Which of the following accounts is considered a prepaid expense? - ✔✔-Supplies
Prepaid Rent
Prepaid Insurance
Describe the final step in the adjusting process. - ✔✔-The final step is to create an adjusting journal
entry to get from step 1 to step 2
Questions and answers, VERIFIED.
Which of the following could be a logical or realistic accounting period for a business that is creating
financial statements? (Check all that apply.) - ✔✔-Six-month
One-month
One-year
Accrual basis accounting recognizes __________ (equity/revenues/expenses) when earned and records
__________ (revenues/expenses/liabilities) when ____________ (incurred/paid) in order to adhere to
the matching principle. - ✔✔-Revenues
Expenses
Incurred
The expense recognition (matching) principle aims to record _________ (expenses/assets/liabilities) in
the same accounting period as the _________ (expenses/revenues/assets) that are earned as a result of
those costs. This principle is a major part of the ____________ (timing/adjusting/esetimating) process -
✔✔-Expenses
Revenues
Adjusting
Place the steps in the adjusting process in the correct order in which they would be performed. - ✔✔-
Determine what the current account balance is
Determine what the correct account balance should be
Record an adjusting entry
Choose the statement below which is true regarding adjusting journal entries. - ✔✔-At least one income
statement account and one balance sheet account are always involved.
, Which of the following is (are) true regarding timeliness and the importance of periodic reporting?
(Check all that apply.) - ✔✔-The value of information is often linked to its timeliness
Useful information must reach decision makers frequently and promptly
Businesses report financial information at regular intervals to ensure timeliness of data
A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was
increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting
from the choices below. - ✔✔-Insurance expense would be debited for $300
Accrual basis accounting is defined as: (Check all that apply.) - ✔✔-An accounting system that uses the
adjusting process to recognize revenues when earned and expenses when incurred
An accounting system that uses the matching principle to determine when to recognize revenues and
expenses
An accounting system which is consistent with generally accepted accounting principles
$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month.
(The Supplies account was increased at the time of the initial purchase.) Demonstrate the required
adjusting journal entry by selecting from the choices below. (Check all that apply.) - ✔✔-Supplies would
be credited for $300
Supplies expense would be debited for $300
Which of the following statements describes the expense recognition (matching) principle? (Check all
that apply.) - ✔✔-Expenses should be matched in the same accounting period as the revenues that are
recognized as a result of those expenses
Matching of expenses with revenues is a major part of the adjusting process
Which of the following accounts is considered a prepaid expense? - ✔✔-Supplies
Prepaid Rent
Prepaid Insurance
Describe the final step in the adjusting process. - ✔✔-The final step is to create an adjusting journal
entry to get from step 1 to step 2
