Quiz 2 ACC101

Interim financial statements refer to financial reports: 

• A. That cover less than one year, usually spanning one, three, or six-month periods.

• B. That are prepared before any adjustments have been recorded.

• That show the assets above the liabilities and the liabilities above the equity.

•  Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid.

• E. Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.

The 12-month period that ends when a company's activities are at their lowest point is called the: 

• A. Fiscal year.

• B. Calendar year.

• C. Natural business year..

• D. Accounting period

The length of time covered by a set of periodic financial statements is referred to as

• A. Fiscal cycle

• B. Natural business year.

• C. Accounting period.

• D. Business cycle.

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the: 

• A. Recognition principle.

• B. Cost principle.

• C. Cash basis of accounting

• D.Matching principle.

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called: 

• A. Accrual basis accounting.

• B. Operating cycle accounting

• C.Cash basis accounting.

• D. Revenue recognition accounting.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: 

• A. Cash basis accounting.

• B. The matching principle.

• C. The time period principle.

• D. Accrual basis accounting.

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of: 

• A. Items that require contra accounts.

• B. tems that require adjusting entries

• .C. Asset and equity

• .D. Asset accounts.

An adjusting entry could be made for each of the following except: 

• A. Prepaid expenses

• .B. Depreciation

• C. Owner withdrawals

• .D. Unearned revenues.

Profit margin is defined as: 

• A. Revenues divided by net sales.

• A. Revenues divided by net sales.

  B. Net sales divided by assets.

• C. Net income divided by net sales.

• D. Net income divided by assets.

A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: 

• A. 2%.

• B. 20%.

• C. 200%.

• D. 500%.