Financial Accounting David Spiceland Wayne
Thomas Don Herrmann 4th Edition- Test Bank
Chapter 03
The Accounting Cycle: End of the Period
True / False Questions
1. Accrual-basis accounting involves recording revenues when earned and
recording expenses with their related revenues.
True False
2. The revenue recognition principle states that we record revenue in the
period in which we collect cash.
True False
3. According to the revenue recognition principle, if a company provides
services to a customer in the current year but does not collect cash until
the following year, the company should report the revenue in the current
year.
,True False
4. Jones Corporation provides services to a customer on June 17, but the
customer does not pay for the services until August 12. According to the
revenue recognition principle, Jones Corporation should record the
revenue on August 12.
True False
5. The matching principle states that we recognize expenses in the same
period as the revenues they help to generate.
True False
6. According to the concept of expense recognition under accrual-basis
accounting, if costs associated with producing revenue in the current
year are not paid in cash until the following year, the costs should be
expensed in the current year.
True False
7. Under cash-basis accounting, we record revenues at the time we
receive cash and expenses at the time we pay cash.
True False
, 8. Under cash-basis accounting, the timing of cash inflows and outflows
exactly matches the reporting of revenues and expenses in the income
statement.
True False
9. Under cash-basis accounting, if a company provides services to a
customer in the current year but does not collect cash until the following
year, the company should report the revenue in the current year.
True False
10. Under cash-basis accounting, if costs associated with producing
revenue in the current year are not paid in cash until the following year,
the costs should be expensed in the following year.
True False
11. Because cash-basis accounting violates both the revenue
recognition principle and the matching principle, it is generally not
accepted in preparing financial statements.
True False
12. Adjusting entries involve recording events that have occurred but
that have not yet been recorded by the end of the period.
Thomas Don Herrmann 4th Edition- Test Bank
Chapter 03
The Accounting Cycle: End of the Period
True / False Questions
1. Accrual-basis accounting involves recording revenues when earned and
recording expenses with their related revenues.
True False
2. The revenue recognition principle states that we record revenue in the
period in which we collect cash.
True False
3. According to the revenue recognition principle, if a company provides
services to a customer in the current year but does not collect cash until
the following year, the company should report the revenue in the current
year.
,True False
4. Jones Corporation provides services to a customer on June 17, but the
customer does not pay for the services until August 12. According to the
revenue recognition principle, Jones Corporation should record the
revenue on August 12.
True False
5. The matching principle states that we recognize expenses in the same
period as the revenues they help to generate.
True False
6. According to the concept of expense recognition under accrual-basis
accounting, if costs associated with producing revenue in the current
year are not paid in cash until the following year, the costs should be
expensed in the current year.
True False
7. Under cash-basis accounting, we record revenues at the time we
receive cash and expenses at the time we pay cash.
True False
, 8. Under cash-basis accounting, the timing of cash inflows and outflows
exactly matches the reporting of revenues and expenses in the income
statement.
True False
9. Under cash-basis accounting, if a company provides services to a
customer in the current year but does not collect cash until the following
year, the company should report the revenue in the current year.
True False
10. Under cash-basis accounting, if costs associated with producing
revenue in the current year are not paid in cash until the following year,
the costs should be expensed in the following year.
True False
11. Because cash-basis accounting violates both the revenue
recognition principle and the matching principle, it is generally not
accepted in preparing financial statements.
True False
12. Adjusting entries involve recording events that have occurred but
that have not yet been recorded by the end of the period.
