What is the main difference between depreciation expense and accumulated depreciation?In what financial statement will each account appear?

What is the difference between a current liability and a long-term liability?

What type of accounts is usually referred to as temporary accounts?

Why is unearned revenue a liability?

Describe the nature of fixed assets.

TRUE/FALSE.Write 'T' if the statement is true and 'F' if the statement is false.

1) Accrual accounting records transactions ONLY when cash is received or paid.

2) There are two ways to do an accounting: accrual accounting and cash-basis accounting.

3) The matching principle guides accounting for expenses: identifying all expenses incurred during the period, measuring the expenses, and matching them against the revenues earned during that time period.

4) The account "Prepaid Insurance" is a liability account.

5) The financial statements should be prepared in this order: 1. income statement, 2. balance sheet, and 3. statement of owner's equity.

6) Ending capital from the statement of owner's equity is not included on the balance sheet.

MULTIPLE CHOICE.Choose the one alternative that best completes the statement or answers the question.

7) If a company is using the accrual method of accounting, when is revenue recorded?

A) When services are rendered, even though cash may be received at a later date.

B)When cash is received, even though services may be rendered at a later date.

C) Only when cash is received at the completion of the services.

D) Only when cash is received after the completion of the services.

8) Under which of the following methods of accounting is revenue recorded ONLY when cash is received?

A) Receivable

B) Cash

C) Accrual

D) Deferral

9) Generally accepted accounting principles require the use of which of the following methods of accounting?

A) Cash

B)Deferral

C) Accrual

D Receivable

10) Which of the following entries would be recorded ONLY if a company is using the accrual method of accounting?

A)Cash 1,000

Accounts Receivable 1,000

B) Cash 1,000

Service Revenue1,000

C) Salary Expense 1,000

Cash 1,000

D) Both A and C

11) Under the accrual method of accounting, service revenue is recorded at which of the following times?

A) When the services are completed

B) At the end of the accounting period

C) When payment for the services is received

D) Both A and B

12) Under the cash-basis method of accounting, service revenue is recorded at which of the following times?

A) When the services are completed

B) When payment for the services is received

C) At the end of the accounting period

D) Both A and B

13)

Robert Rogers, CPA, completed accounting services in December. A bill was mailed on December 30. A check arrived in the mail and was deposited on January 5. The revenue principle would require that which of the following accounts appear on the balance sheet for December 31?

A) Accounting Expense

B) Accounts Receivable

C) Service Revenue

D )Accounts Payable

14) An accrued expense is which of the following?

A) An expense that will be incurred and paid in the future

B) An expense that the business has incurred but not yet paid

C) An expense that has been paid and incurred

D) An expense that the business has paid but not yet incurred

15) A prepaid expense is which of the following?

A) An expense that will be incurred and paid in the future

B) An expense that the business has paid but not yet incurred

C) An expense that the business has incurred but not yet paid

D) An expense that has been paid and incurred

16) On December 31, 2010, the balance in Pinnacle Exploration Company's Unearned Revenue is $4,200. In January, 2011 the company received an advance payment of $12,000 for services to be performed. By May 31, adjustments had been made to recognize $8,500 of the revenue. What would be the balance in Unearned Revenue on May 31, 2011?

A)$8,500B)$12,000C)$7,700D)$4,200

17) What type of account is Accumulated Depreciation and what is its normal balance?

A) Revenue, debit

B) Contra asset, credit

C) Liability, credit

D) Expense, debit

18) What type of account is Unearned Revenue and what is its normal balance?

A) Liability, credit

B) Asset, credit

C) Asset, debit

D )Revenue, debit

19) Financial statements can be prepared from which of the following?

A) An adjusted trial balance

B) A general journal

C) An unadjusted trial balance

D )A general ledger

20) Which of the following reports a company's results of operations?

A) Income statement

B) Balance sheet

C) Adjusted trial balance

D )Statement of owner's equity

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