Financial Accounting Chapter 4 Exam Questions and Answers
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Course
Financial Accounting
Institution
Financial Accounting
What is the periodicity assumption? - Answer-Accounting divides the economic life of a business into artificial time periods.
What is the revenue recognition principles? - Answer-Requires that companies recognize revenue in the accounting period in which it is earner.
What is the expense reco...
Financial Accounting Chapter 4 Exam
Questions and Answers
What is the periodicity assumption? - Answer-Accounting divides the economic life of a
business into artificial time periods.
What is the revenue recognition principles? - Answer-Requires that companies
recognize revenue in the accounting period in which it is earner.
What is the expense recognition principle? - Answer-The practice of expense
recognition.
What is the matching principle? - Answer-The same thing as expense recognition
principle.
What is the difference between accrual and cash-basis accounting? - Answer-Accrual
basis accounting are transactions that change a company's financial statements are
recorded in the periods in which the events occur even if cash was not exchanged.
Cash basis accounting are companies record revenues only when cash is received.
They record expense only when cash is paid.
Why do we make adjusting entries> - Answer-In order for revenues to be recorded in
the period in which they are earned, and for expenses to be recognized in the period in
which they are incurred.
What are adjusting entries? - Answer-To ensure that the revenue recognition and
expense recognition principles are followed.
Why are adjusting entries necessary? - Answer-Because the trial balance the first
pulling together of the transaction data.
When are adjusting entries required? - Answer-Every time a company prepare financial
statements.
Every adjusting entry will include what two types of accounts? - Answer-income
statement account and balance sheet account.
What are the two types of adjusting entries? - Answer-accurals and deferrals
What are prepaid expenses and what type of account are they? - Answer-Companies
record payments of expenses that will benefit more than one accounting period as
assets. They are costs that expire either with passage of time or through us. Asset
account.
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