Chapter 3The Adjusting ProcessMULTIPLE CHOICE1.The revenue recognition concepta.is in not in conflict with the cash method of accountingb.determines when revenue is credited to a revenue accountc.states that revenue is not recorded until the cash is receivedd.controls all revenue reporting for the cash basis of accountingANS:BDIF:ModerateOBJ:03-012.The matching concepta.addresses the relationship between the journal and the balance sheetb.determines whether the normal balance of an account is a debit or creditc.requires that the dollar amount of debits equal the dollar amount of credits on a trial balanced.determines that expenses related to revenue be reported at the same time the revenue is reportedANS:DDIF:ModerateOBJ:03-013.Using accrual accounting, revenue is recorded and reported onlya.when cash is received without regard to when the services are renderedb.when the services are rendered without regard to when cash is receivedc.when cash is received at the time services are renderedd.if cash is received after the services are renderedANS:BDIF:ModerateOBJ:03-014.Using accrual accounting, expenses are recorded and reported onlya.when they are incurred, whether or not cash is paidb.when they are incurred and paid at the same timec.if they are paid before they are incurredd.if they are paid after they are incurredANS:ADIF:ModerateOBJ:03-015.One of the accounting concepts upon which deferrals and accruals are based isa.matchingb.costc.price-level adjustmentd.conservatismANS:ADIF:ModerateOBJ:03-016.If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry?a.decreases the balance of an owners equity accountb.increases the balance of an liability accountc.increases the balance of an asset accountd.decreases the balance of an expense accountANS:BDIF:DifficultOBJ:03-017.If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry?a.increases the balance of a contra asset accountb.increases the balance of an asset accountc.decreases the balance of an owners equity accountd.increases the balance of an expense accountANS:DDIF:DifficultOBJ:03-018.The primary difference between deferred and accrued expenses is that deferred expenses havea.been incurred and accrued expenses have notb.not been incurred and accrued expenses have been incurredc.been recorded and accrued expenses have not been incurredd.not been recorded and accrued expenses have been incurredANS:BDIF:DifficultOBJ:03-019.Prior to the adjusting process, accrued expenses havea.not yet been incurred, paid, or recordedb.been incurred, not paid, but have been recordedc.been incurred, not paid, and not recordedd.been paid but have not yet been incurredANS:CDIF:DifficultOBJ:03-0110.Prior to the adjusting process, accrued revenue hasa.been earned and cash receivedb.been earned and not recorded as revenuec.not been earned but recorded as revenued.not been recorded as revenue but cash has been receivedANS:BDIF:DifficultOBJ:03-0111.Deferred expenses havea.not yet been recorded as expenses or paidb.been recorded as expenses and paidc.been incurred and paidd.not yet been recorded as expensesANS:DDIF:DifficultOBJ:03-0112.Deferred revenue is revenue that isa.earned and the cash has been receivedb.earned but the cash has not been receivedc.not earned and the cash has not been receivedd.not earned but the cash has been receivedANS:DDIF:DifficultOBJ:03-0113.Adjusting entries area.the same as correcting entriesb.needed to bring accounts up to date and match revenue and expensec.optional under generally accepted accounting principlesd.rarely needed in large companiesANS:BDIF:ModerateOBJ:03-0114.Adjusting entries affect at least onea.income statement account and one balance sheet accountb.revenue and the drawing accountc.asset and one owners equity accountd.revenue and one capital accountANS:ADIF:ModerateOBJ:03-0115.The general term employed to indicate an expense that has not been paid and has not yet been recognized in the accounts by a routine entry isa.capitalb.deferralc.accruald.inventoryANS:CDIF:EasyOBJ:03-0116.Which of the following is not a characteristic of accrual basis of accounting?a.Revenues and expenses are reported in the period in which cash is received or paidb.Revenues are reported in the income statement in the period in which they are earnedc.Supports the m