Quiz No. 3

Under the accrual basis, transactions are recorded on the period when cash is received or paid.

• True

• False

Depreciation is an example of:

• Direct Association

• Systematic and Rational Allocation

• Immediate Recognition

• None of the choices.

This is an example of Direct Association:

• Cost of Goods Sold

• Rent Expense

• Prepaid Expense

• Salaries Expense

These journal entries convert a company's accounting records to the accrual basis of accounting.

• Adjusting entries

• Closing entries

• Simple journal entries

• Compound journal entries

If a business paid for rent in advance and initially recorded it as an expense, the adjusting entry at the end of the period to recognize the unexpired portion will include:

• Debit to Rent Expense

• Credit to Rent Expense

• Credit to Prepaid Rent

• Credit to Cash

If a business paid for rent in advance and initially recorded it as an asset, the adjusting entry at the end of the period to recognize the expired portion will include:

• Debit to Prepaid Rent

• Credit to Rent Expense

• Credit to Prepaid Rent

• Credit to Cash

The adjusting entry to record the depreciation for equipment at the end of the period includes:

• Credit to Accumulated Depreciation

• Credit to Equipment

• Credit to Depreciation Expense

• Credit to Cash

At the end of the period, it was found that salaries of employees worth 10,000 was not yet recorded and paid by the business. What is the effect of this in the accounting records?

• Asset is overstated

• Liability is understated

• Equity is understated

• Asset is understated

At the end of the period, it was found that salaries of employees worth 10,000 was not yet recorded and paid by the business. The adjusting entry to record the transaction will include a:

• Credit to Cash 10,000

• Debit to Salaries Expense 10,000

• Debit to Salaries Payable 10,000

• Credit to Salaries Expense 10,000

A business received cash from a customer as an advance payment for services to be rendered. The business initially recognize this receipt as revenue. At the end of the period, only 50% of the services paid were rendered by the business. The adjusting entry to recognize the unearned portion will include:

• Debit to Service Revenue

• Credit to Service Revenue

• Debit to Unearned Revenue

• Credit to Accounts Receivable