Accounting Chapter 3

What type of transactions does cash-basis accounting record?

• Only credit transactions

• Only cash transactions

• Both cash and credit transactions

• Only electronic transactions

In cash-basis accounting, how are cash receipts treated?

• As liabilities

• As expenses

• As revenues

• As assets

How are cash payments handled in cash-basis accounting?

• As revenues

• As liabilities

• As expenses

• As assets

What does accrual-basis accounting record?

• The impact of a business transaction as it occurs

• Only cash transactions

• Transactions when cash is received

• Transactions when cash is paid

When is revenue recognized in accrual-basis accounting?

• When it is earned

• When it is collected

• When it is deposited

• When it is invoiced

When are expenses recognized in accrual-basis accounting?

• When they are incurred

• When they are paid

• When they are billed

• When they are approved

What does the matching principle in accounting state?

• Expenses must be recognized in the period in which they are used to earn the income

• Revenue must be recognized when cash is received

• Expenses must be recognized when cash is paid

• Revenue and expenses must be recognized in the same period

What does GAAP require for financial statements?

• Cash accounting

• Accrual accounting

• Single-entry accounting

• Tax accounting

Which of the following is a noncash transaction recorded in accrual accounting?

• Cash sales

• Cash purchases

• Sales on account

• Cash withdrawals

What type of expense is recorded in accrual accounting even if it is not yet paid?

• Cash expense

• Accrued expense

• Deferred expense

• Capital expense