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ACCT 2000 exam 2 lowe-ardoin Questions
and Correct Answers
Perodicity Ans: requires accountants to divide the economic life
of a business into artificial time period
the revenue recognition principle Ans: companies recognize
revenue in the accounting period in which the performance
obligation is satisfied
the expense recognition principle Ans: expenses are matched with
revenues in the period when efforts are expended to generate
revenue
accrual basis accounting Ans: revenues that are recognized when
services are preformed, even if cash was not received. expenses
are recognized when incurred, even if cash was not paid ( DOESNT
FOLLOW CASH )
cash basis accounting Ans: revenues are recognized only when
cash is received and expenses are recognized only when cash is
paid. NOT GAAP. ( FOLLOW CASH )
everytime it prepares financial statements Ans: When does a
company make adjusting entries?
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, 2 | Page
prepaid expense Ans: expenses paid in cash and recorded as
assets before they are used or consumed
unearned revenue Ans: cash received and reported as liabilities
before revenue is earned
increase to an expense; decrease to an asset Ans: adjusting entry
results in a increase to _______ account and a decrease to a
__________ account
accruals; accrued revenue Ans: revenue for services performed
but not yet received in cash or recorded
accured expenses Ans: expenses incurred but not yet paid in cash
or recorded
use PRT:
principle x rate x time = time period for calc. interest
EX- 5000x12%x1/12 Ans: Interest EX:
Sierra Corporation signed a three month note payable in the
amount of 5000 on oct.1 the note requires sierra to pay interest at
an annual rate of 12%.
electronic fund transfer (EFT) Ans: allows the transfer of funds
without paper (deposit tickets, checks, etc). Includes
© 2025 All rights reserved
ACCT 2000 exam 2 lowe-ardoin Questions
and Correct Answers
Perodicity Ans: requires accountants to divide the economic life
of a business into artificial time period
the revenue recognition principle Ans: companies recognize
revenue in the accounting period in which the performance
obligation is satisfied
the expense recognition principle Ans: expenses are matched with
revenues in the period when efforts are expended to generate
revenue
accrual basis accounting Ans: revenues that are recognized when
services are preformed, even if cash was not received. expenses
are recognized when incurred, even if cash was not paid ( DOESNT
FOLLOW CASH )
cash basis accounting Ans: revenues are recognized only when
cash is received and expenses are recognized only when cash is
paid. NOT GAAP. ( FOLLOW CASH )
everytime it prepares financial statements Ans: When does a
company make adjusting entries?
© 2025 All rights reserved
, 2 | Page
prepaid expense Ans: expenses paid in cash and recorded as
assets before they are used or consumed
unearned revenue Ans: cash received and reported as liabilities
before revenue is earned
increase to an expense; decrease to an asset Ans: adjusting entry
results in a increase to _______ account and a decrease to a
__________ account
accruals; accrued revenue Ans: revenue for services performed
but not yet received in cash or recorded
accured expenses Ans: expenses incurred but not yet paid in cash
or recorded
use PRT:
principle x rate x time = time period for calc. interest
EX- 5000x12%x1/12 Ans: Interest EX:
Sierra Corporation signed a three month note payable in the
amount of 5000 on oct.1 the note requires sierra to pay interest at
an annual rate of 12%.
electronic fund transfer (EFT) Ans: allows the transfer of funds
without paper (deposit tickets, checks, etc). Includes
© 2025 All rights reserved
