True / False Questions

1. ____ Adjusting entries are used to record the effects of internal economic events.

2. ____ Internal transactions have no effect on the accounting equation.

3. ____ Internal transactions often include cash payments.

4. ____ The timeliness principle assumes that an organization's activities can be divided into specific periods.

5. ____ The 12 consecutive months (or 52 weeks) selected as an organization's accounting period is called the fiscal year.

6. ____ Adjusting entries are required to match revenues and expenses.

7. ____ The matching principle requires that revenue be assigned to the accounting period in which it is earned.

8. ____ Since the revenue recognition principle requires that revenues be earned, there is no such thing as unearned revenues in accounting.

9. ____ The cash basis of accounting commonly results in financial statements that are not comparable from period to period.

10. ____ The cash basis of accounting is an accounting system in which revenues are reported in the income statement when cash is received and expenses are reported when cash is paid.

11. ____ The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

12. ____ Adjusting entries are made after the preparation of financial statements

13. ____ The accrual basis of accounting reflects the understanding that the economic effect of revenue generally occurs when it is earned, not when cash is received